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DEFENCE OF USURY. 

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A 

DEFENCE OF USURY; 

SHOWING THE 

IMPOLICY OF THE PRESENT LEGAL RESTRAINTS 


TERMS OF PECUNIARY BARGAINS. 

TO WHICH IS ADDED, 

A LETTER TO ADAM SMITH, 

ON THE 

DISCOURAGEMENT OF INVENTIVE INDUSTRY. 

BY JEREMY BENTHAM, 

M 

OF LINCOLN’S INN. 


Etncrtcan lEMtton. 


[PRINTED FOR PRIVATE DISTRIBUTION.] 

PHILADELPHIA. 


1 8 7 7 . 





CONTENTS 


PAGE. 

LETTER I. 

Introduction, . . . . . . .7 

LETTER II. 

Reasons for Restraints — Prevention of Usury, . 9 

LETTER III. 

Reasons for Restraints — Prevention of Prodigality, . .12 

LETTER IV. 

Reasons for Restraints — Protection of Indigence, . . 18 

LETTER Y. 

Reasons for Restraints — Protection of Simplicity, . . .20 

LETTER YI. 

Mischiefs of the Anti-usurious Laws, .... 22 

LETTER VII. 

Inefficacy of Anti-usurious Laws, . . . . .28 

LETTER YIII. 

Virtual Usury allowed, ..... 32 

LETTER IX. 

Blackstone Considered, . . . . . .36 


IV 


CONTENTS. 


LETTER X. PAGE 

Grounds of the Prejudices against Usury, . . 40 

LETTER XI. 

Compound Interest, . . . - . .45 

LETTER XII. 

* Maintenance and Champerty, .... 48 

LETTER XIII. 

To Dr. Smith, on Projects in Arts, . . . .52 

* Terms used here strictly in a legal sense. 


Maintenance . — An officious intermeddling in a cause depending between others, by 
assisting either party with money or means to prosecute or defend it. ( Webster.) 

Champerty . — An agreement by a stranger, having otherwise no interest, with the 
plaintiff or defendant in a suit, to supply money, services, information, or evidence, 
by which to aid in maintaining and carrying on a suit, in consideration that he shall 
receive a part of the matter in suit, as commission or otherwise, if the party with 
whom the agreement is made prevails ; the purchasing a suit or right of suing ; 
maintenance, with the addition of an agreement to divide the thing in suit. ( Webster.) 


PREFACE 


(TO EDITION OF 1842.) 


On financial policy, there seems a value in posthumous testimony, 
which has not always been appreciated. Men will listen patiently £o 
theories, both new and wonderful, promulged by almost any one, on 
every matter but that of their own secular pursuit. The way of bor- 
rowing and lending and making money is a thing to be decided on “to- 
day ” before the bank closes ; and no consideration which leads beyond 
that celebrated period is safe to think about, much less to act on. New 
rules of diet or new forms of worship may be tolerated and even adopt- 
ed; but a plan of “doing business ” different from our own or our 
father’s is an innovation too monstrous to be received from any one 
“still in the flesh.” But when the innovator has passed to his grave, 
and most of his immediate generation are laid in theirs, the power of 
prejudice abates. Both these preliminaries have been accomplished in 
reference to this little volume, and it now comes to us from its author 
and its first readers, purged alike of the' sophistry which they imagined 
and of the local sarcasm he may have infused. 

Since the appearance of our first edition, it has been objected that 
Bentham’s views of borrowing and lending were peculiar to the use of 
real money, and that our currency, being made up of the issues of “ the 
Banks,” and therefore possessing only relative or nominal value, must 
have its price fixed by formal statute. This distinction can hardly have 
been made in seriousness, but lest it be so intended, we reply that this 
question of interest lies entirely between the immediate borrower and 
lender, and if the equivalent furnished by the latter serves the purpose 
of the former to the full, a remuneration proportioned to that service is 
due, whether the loan consisted of coin or cockle shells. 


VI 


PREFACE. 


We are not of those who'boast insensibility to the present difficulties 
of general business, but in all humility we differ with many of large ex- 
perience as to the means of relief. We do not believe that the remedy / 
lies in any new positive laws; individual exertion lies stifled beneath the 
weight of useless or partial legislation, as unfriendly to healthy business 
as the embrace of the anaconda: it is for permission to unwind this 
murderous coil that we plead, and the fold most within our reach is the 
Usury Law. 

We propose a return to safe practice by a recurrence to sound prin- 
ciples. The rule of fair equivalents never misleads. For value received 
or service done no law , at least, should hinder a full return. About the 
fireside or within the capitol nothing is true policy which makes bad 
faith necessary; yet the statutes against money bargains can be enforced 
only through treachery : they offer a direct inducement to return evil 
for good ; and never yet spared a dollar to needy worth, or dried a sin- 
gle tear of misery. H. O. 

Philadelphia , February, 1842. 


A DEFENCE OF USURY. 


LETTEK I. 

INTRODUCTION. 

Crichoff, in White Russia, 
January, 1787. 

Among the various species or modifications of liberty, of which, 
on different occasions, we have heard so much in England, I do not 
recollect ever seeing anything yet offered in behalf of the liberty 
of making one's own terms in money bargains. From so general 
and universal a neglect, it is an old notion of mine, as you well 
know, that this meek and unassuming species of liberty has been 
suffering much injustice. 

A fancy has taken me just now, to trouble you with my reasons : 
which, if you think them capable of answering any good purpose, 
you may forward to the press ; or, in the other case, what will give 
you less trouble, to the fire. 

In a word, the proposition I have been accustomed to lay down to 
myself, on this subject, is the following one, viz. that no man of ripe 
years and of sound mind , acting freely and with his eyes open , ought 
to be hindered , with a view to his advantage, from making such bar- 
gain in the way of obtaining money as he thinks fit ; nor (what is 
a necessary consequence) anybody hindered from supplying him 
upon any terms he thinks proper to accede to. 

This proposition, were it to be received, would level, you see, at 
one stroke, all the barriers which law, either statute or common, 
have, in their united wisdom, set up, either against the crying sin 

7 


8 


A DEFENCE OF USURY. 


of Usury, or against the hard-named and little -heard- of practice of 
Champerty; to which we must also add a portion of the multi- 
farious and as little-heard -of offence of Maintenance. 

On this occasion, were it any individual antagonist I had to deal 
with, my part would be a smooth and easy one. “ You who fetter 
contracts, you who lay restraints on the liberty of man, it is for 
you (I should say) to assign a reason for your doing so.” That 
contracts in general ought to be observed, is a rule the propriety 
of which no man was ever yet found wrong-headed enough to deny ; 
if this case is one of the exceptions (for some, doubtless, there are) 
which the safety and welfare of every society require should be taken 
out of that general rule, in this case, as in all those others, it lies upon 
him who alleges the necessity of the exception to produce a reason 
for it. 

This, I say, would be a short and very easy method with an 
individual ; but as the world has no mouth of its own to plead by, 
no certain attorney by which it can “ come and defend this force 
and injury,” I must even find arguments for it at a venture, and 
ransack my own imagination for such phantoms as I can find to 
fight with. 

In favor of the restraints opposed to the species of liberty I 
contend for, I can imagine but five arguments. 

1. Prevention of usury. 

2. Prevention of prodigality. 

8. Protection of indigence against extortion. 

4. Repression of the temerity of projectors. 

5. Protection of simplicity against imposition. 

Of all these in their order. 


LETTER II. 


REASONS FOR RESTRAINTS — PREVENTION OF USURY. 

I will begin with the prevention of usury : because, in the sound 
of the word usury lies, I take it, the main strength of the argu- 
ment : or, to speak strictly, of what is of more importance than 
all argument, of the hold which the opinion I am combating has 
obtained on the imaginations and passions of marlkind. 

“ Usury is a bad thing, and as such ought to be prevented : 
usurers are a bad sort of men, a very bad sort of men, and as such 
ought to be punished and suppressed.” These are among the 
string of propositions which every man finds handed down to him 
from his progenitors: which most men are disposed to accede to 
without examination, and indeed not unnaturally nor even un- 
reasonably disposed; for it is impossible the bulk of mankind 
should find leisure, had they the ability, to . examine into the 
grounds of a hundredth part of the rules and maxims which they 
find themselves obliged to act upon. Very good apology, this, for 
John Trot: but a little more ■ inquisitiveness maybe required of 
legislators. 

You, my friend, by whom the true force of words is so well 
understood, have, I am sure, gone before me in perceiving, that to 
say usury is a thing to be prevented, is neither more nor less than 
begging the matter in question. I know of but two definitions 
that can possibly be given of usury ; one is, the taking of a greater 
interest than the law allows ; this may be styled the political or 
legal definition. The other is, the taking of a greater interest 
than it is usual for men to give and take ; this may be styled the 
moral one ; and this, where the law has not interfered, is, plainly 
enough, the only one. It is plain that, in order for usury to be 
prohibited by law, a positive description must have been found for 
it by law, fixing, or rather superseding, the moral one. To say, 
then, that usury is a thing that ought to be prevented, is saying 
neither more nor less than that the utmost rate of interest which 
shall be taken ought to be fixed, and that fixation enforced by 


10 


A DEFENCE OF USUEY. 


penalties, or such other means, if any, as may answer the purpose 
of preventing the breach of it. A law punishing usury supposes, 
therefore, a law fixing the allowed legal rate of interest ; and the 
propriety of the penal law must depend upon the propriety of the 
simply prohibitive, or, if you please, declaratory one. 

One thing, then, is plain : that, antecedently to custom growing 
from convention, there can be no such thing as usury ; for, what 
rate of interest is there that can naturally be more proper than 
another ? What natural fixed price can there be for the use of 
money more than for the use of any other thing? Were it not, 
then, for custom, usury, considered in a moral view, would not so 
much as admit of a definition : so far from having existence, it 
would not so much as be conceivable : nor, therefore, could the 
law, in the definition it took upon itself to give of such offence, 
have so much as a guide to steer by. Custom, therefore, is the 
sole basis which either the moralist, in his rules and precepts, or 
the legislator, in his injunctions, can have to build upon. But 
what basis can be more weak or unwarrantable, as a ground for 
coercive measures, than custom resulting from free choice ? My 
neighbors, being at liberty, have happened to concur among them- ' 
selves in dealing at a certain rate of interest; I, who have money 
to lend, and Titius, who wants to borrow it of me, would be glad, 
the one of us to accept, the other to give, an interest somewhat 
higher than theirs ; why is the liberty they exercise to be made a 
pretence for depriving me and Titius of ours ? 

Nor has blind custom, thus made the sole and arbitrary guide, 
anything of steadiness or uniformity in its decisions ; it has varied 
from age to age in the same country ; it varies from country to 
country in the same age ; and the legal rate has varied along with 
it ; and, indeed, with regard to times past, it is from the legal rate, 
more readily than from any other source, that we collect the 
customary. Among the Romans, till the time of Justinian, we 
find it a3 high as twelve per cent. ; in England, so late as the time 
of Henry viii, we find it at ten per cent.; succeeding statutes 
reduced it to eight, then to six, and lastly to five, where it stands 
at present (1787). Even at present in Ireland it is at six per 
cent.; and in the West Indies at eight per cent.; and in Hindos- 


A DEFENCE OF USURY. 


11 


tan, where there is no rate limited by law, the lowest customary 
rate is ten or twelve. At Constantinople, in certain cases, as I 
have been well informed, thirty per cent, is a common rate. Now, 
of all these widely different rates, what one is there that is 
intrinsically more proper than another ? What is it that evidences 
this propriety in each instance? What but the mutual con- 
venience of the parties, as manifested by their consent ? It is, 
then, convenience that has produced whatever there has been of 
custom in the matter ; then what can there be in custom, to make 
it a better guide than the convenience which gave it birth ? And 
what is there in convenience, that should make it a worse guide 
in one ca^e than in another ? It would be convenient to me to 
give six per cent, for money : I wish to do so. “ No (says the 
law), you shan’t.” Why so ? “ Because it is not convenient to 
your neighbor to give above five for it.” Can anything be more 
absurd than such a reason ? 

Much has not been done, as yet, I think, by legislators, in the 
way of fixing the price of other commodities ; and, in what little 
has been done, I believe the probity of the intention has, in 
general, been rather more unquestionable than the rectitude of the 
principle or the felicity of the result. Putting money out at 
interest is exchanging present money for future; but mankind are 
as yet to learn why a policy, which, as applied to exchanges in 
general, would be generally deemed absurd and mischievous, 
should be deemed necessary in the instance of this particular kind 
of exchange. For him who takes as much as he can get for the 
use of any other sort of thing, a house, for instance, there is no 
particular appellation, nor any mark of disrepute; nobody is 
ashamed of doing so, nor is it usual so much as to profess to do 
otherwise ; and why a man who takes as much as he can get (be 
it six, or seven, or eight, or ten per cent.) for the use of a sum of 
money, should be called usurer, should be loaded with an oppro- 
brious name, any more than if he had bought a house with it, and 
made a proportionable profit by the house, is more than I can see. 

Another thing I would also wish to learn, is, why the legislator 
should be more anxious to limit the rate of interest one way than 
the other ? why he should set his face against the owners of that 


12 


A DEFENCE OF USURY. 


species of property more than any other ? why he should make it 
his business to prevent their getting more than a certain price for 
the use of it, rather than to prevent their getting less f why, in 
short, he should not take means for making it penal to offer less, 
for example, than five per cent., as well as to accept more? Let 
any one that can, find an answer to these questions ; it is more 
than I can do: I except always the distant and imperceptible 
advantage of sinking the price of goods of all kinds, and in that 
remote way multiplying the future enjoyment of individuals ; but 
this was a consideration by far top distant and refined to have been 
the original ground for confining the limitation to this side. 


LET TEE III.. 

REASONS- FOR RESTRAINTS- — PREVENTION OF PRODIGALITY. 

Having done with sounds, I come gladly to propositions, which, 
as far as they are true in point of fact, may deserve the name of 
reasons. And first, as to the efficacy of such restrictive laws with 
regard to the prevention of prodigality. 

That prodigality is a bad thing, and that the prevention, of it is 
a proper object for the legislator to propose to himself, so long as 
he confines himself to what I look upon as proper measures, I have 
no objection, to allow, at least for the purpose of argument ; though, 
were this the principal question, I should look upon it as incum- 
bent on me to place in a fair light the reasons there may be for 
doubting, how far, with regard to a person arrived at the age of 
discretion, third persons may be competent judges as to which of 
two pains may be of greater force and value to him, the present 
pain of restraining his present desires, or the future contingent 
pain he may be exposed to suffer from the want to which the ex- 
pense of gratifying these desires may hereafter have reduced him. 
To prevent our doing mischief to one another, it is but too necessary 


A DEFENCE OF USURY. 


13 


to put bridles into all our mouths ; it is necessary to the tran- 
quillity and very being of society : but that the tacking of leading- 
strings upon the backs of grown persons, in order to prevent their 
doing themselves mischief, is not necessary, either to the being or 
tranquillity of society, however conducive to its well-being, I think 
cannot be disputed. Such paternal, or if you please, maternal 
care, may be a good work, but it certainly is but a work of 
supererogation. 

For my own part, I must confess that so long as such methods 
only are employed as to me appear proper ones (and such there 
are), I should not feel myself disinclined to see some measures taken 
for the restraining of prodigality : but this I cannot look upon as 
being of the number. My reasons I will now endeavor to lay 
before you. 

In the first place, I take it, that it is neither natural nor usual 
for prodigals, as such, to betake themselves to this method — I mean, 
that of giving a rate of interest above the ordinary one — to supply 
their wants. 

In the first place, no man, I hope you will allow, prodigal or not 
prodigal, ever thinks of borrowing money to spend, so long as he 
has ready money of his own, or effects which he can turn into 
ready money without loss. And this deduction strikes off what I 
suppose you will look upon as the greatest proportion of the persons 
subject at any given time to the imputation of prodigality. 

In the next place, no man, in such a country as Great Britain, at 
least, has occasion, nor is it at all likely he will choose, to take up 
money at an extraordinary rate of interest, who has security to 
give equal to that upon which money is commonly to be had at the 
highest ordinary rate. While so many advertise, as are to be seen 
every day advertising, money to be lent at five per cent., what 
should possess a man who has anything to offer that can be called 
a security, to give, for example, six per cent., is more than I can 
conceive. 

You may say, perhaps, that a man who wishes to lend his 
money out upon security, wishes to have his interest punctually, 
and that without the expense, and hazard, and trouble, and odium 
of going to law ; and that, on this account, it is better to have a, 


14 


A DEFENCE OF USURY. 


sober man to deal with than a prodigal. So far I allow you ; but 
were you to add that on this account it would be necessary for a 
prodigal to offer more than another man. there I should disagree 
with you. In the first place, it is not so easy a thing, nor, I take 
it, a common thing, for the lender upon security to be able to judge, 
or even to form any attempt to judge, whether the conduct of one 
who offers to borrow his money is or is not of such a cast as to 
bring him under this description. The question, prodigal or not 
prodigal, depends upon two pieces of information, neither of which, 
in general, is- very easy to come at ; on the one hand, the amount 
of his means and reasonable expectations ; on the other hand, the 
amount of his expenditure. The goodness or badness of the 
security is a question of a very different nature : upon this head 
every man has a known and ready means of obtaining that sort of 
information which is the most satisfactory the nature of things 
affords, by going to his lawyer. It is, accordingly, I take it, on 
their lawyers’ opinion that lenders, in general, found their deter- 
mination in these cases, and not upon any calculations they may 
have formed concerning the receipt and expenditure of the bor- 
rower. But even supposing a man’s disposition to prodigality to 
be ever so well known, I take it there are always enough to be 
found to whom such a disposition would be rather an inducement 
than an objection, so long as they were satisfied with the security- 
Everybody knows the advantage to be made in case of mortgage, 
by foreclosing or forcing a sale: and that this advantage is not 
uncommonly looked out for, will, I believe, hardly be doubted by 
any one who has had any occasion to observe the course of busi- 
ness in the Court of Chancery. 

In short, so long as a prodigal has anything to pledge or to dis- 
pose of, whether in possession or even in reversion, whether of a 
certain or even of a contingent nature, I see not how he can 
receive the smallest benefit from any laws that are or can be made 
to fix the rate of interest. For, suppose the law to be efficacious 
as far as it goes, and that the prodigal can find none of those mon- 
sters called usurers to deal with him, does he lie quiet ? No such 
thing : he goes on and gets the money he wants, by selling his 
interest, instead of borrowing. He goes on, I say; 'for if he has 


A DEFENCE OF USURY. 


15 


prudence enough to stop him anywhere, he is not that sort of man 
whom it can be worth while for the law to attempt stopping by 
such means. It is plain enough, then, I conclude, that to a prodi- 
gal thus circumstanced, the law cannot be of any service ; on the 
contrary it may, and in many cases must, be of disservice to him, 
by denying him the option of a resource which, how disadvan- 
tageous soever, could not well have proved more so, but would 
naturally have proved less so, than those which it leaves still open 
to him. But of this hereafter. 

I now come to the only remaining class of prodigals, viz., those 
who have nothing that can be called a security to offer. These, 
certainly, are not more likely to get money upon an extraordinary 
rate of interest, than an ordinary one. Persons who either feel, or 
find reasons for pretending to feel, a friendship for the borrower, 
cannot take of him more than the ordinary rate of interest : 
persons who have no such motives for lending him, will not lend 
him at all. If they know him for what he is, that will prevent 
them, of course : and even though they should know nothing of him 
by any other circumstance, the very circumstance of his not being 
able to find a friend to trust him at the highest ordinary rate, will 
be sufficient reason to a stranger for looking upon him as a man 
who, in the judgment of his friends, is not likely to pay. 

The way that prodigals run into debt, after they have spent 
their substance, is, I take it, by borrowing of their friends and ac- 
quaintance, at ordinary interest, or more commonly at no interest, 
small sums such as each man may be content to lose, or be ashamed 
to ask real security for ; and as prodigals have generally an exten- 
sive acquaintance (extensive acquaintance being at once the cause 
and effect of prodigality) the sum total of the money a man may 
thus find means to squander may be considerable, though each 
sum borrowed may, relatively to the circumstances of the lender, 
have been inconsiderable. This I believe to be the race which 
prodigals, who have spent their all, run at present, under the 
actual system of restraining laws : and this, and no other, I take 
it, would be the race they would run were those laws out of the way. 

Another consideration there is, I think, which will complete 
your conviction, if it was not complete before, of the inefficacy of 


16 


A DEFENCE OF USURY. 


these laws as to the putting any sort of restraint upon prodigality. 
This is, that there is another set of people from whom prodigals 
get what they want, and always will get it, so long as credit lasts, 
in spite of all laws against high interest ; and, should they find it 
necessary, at an expense more than equal to any excess of interest 
they might otherwise have to give — I mean the tradesmen who deal 
in the goods they want. Everybody knows it is much easier to 
get goods than money. People trust goods upon much slenderer se- 
curity than they do money : it is very natural they should do so ; 
ordinary profit upon the whole capital employed in a man’s trade, 
even after the expense of warehouse rent, journeymen’s wages, and 
other such general charges are taken into the account and set 
against it, is at least equal double interest ; say ten per cent. Or- 
dinary profit upon any particular parcel of goods must, therefore, 
be a great deal more, say at least triple interest ; fifteen per cent : 
in the way of trading, then, a man can afford to be at least three 
times as adventurous as he can in the way of lending, and with 
equal prudence. So long, then, as a man is looked upon as one who 
will pay, he can much easier get the goods he wants than he could 
the money to buy them with, though he were content to give for it 
twice or even thrice the ordinary rate of interest. 

Supposing anybody to be willing to run the risk of supplying 
him, for the sake of extraordinary gain, although he did not look 
upon his personal security to be equal to that of another man, and, 
for the sake of the extraordinary profit, to run the extraordinary 
risk ; in the trader, in short, in every sort of trader, whom he was 
accustomed to deal with in his solvent days, he sees a person who 
may accept of any rate of profit, without the smallest danger from 
any laws that are or can be made against usury. How idle, then, 
to think of stopping a man from making six, or seven, or eight 
per cent, interest, when, if he chooses to run a risk proportionable, 
he may in this way make thirty or forty per cent., or any rate 
you please. And as to the prodigal, if he cannot get what he 
wants upon these terms, what chance is there of his getting it 
upon any terms, supposing the laws against usury to be away ? 
This, then, is another way in which, instead of serving, it injures 
him, by narrowing his option, and driving him from a market 


A DEFENCE OF USUKY. 


17 


which might hxve proved less disadvantageous, to a more disad- 
vantageous one. 

As far as prodigality, then, is concerned, I must confess I cannot 
see the use of stopping the current of expenditure in this way, at 
the faucet, when there are so many unpreventable ways of letting 
it run out at the bung-hole. 

Whether any harm is done to society, upon the whole, by letting 
so much money drop at once out of the pockets of the prodigal, 
who would have gone on wasting it, into the till of the frugal 
tradesman, who will lay it up, is not worth the inquiry for the 
present purpose; what is plain is, that, so far as the saving the 
prodigal from paying at an extraordinary rate for what he gets to 
spend is the object of the law, that object is not at all promoted 
by fixing the rate of interest upon money borrowed. On the 
contrary, if the law has any effect, it runs counter to that object, 
since, were he to borrow, it would only be in as far as he could 
borrow at a rate inferior to that at which otherwise he would be 
obliged to buy. Preventing his borrowing at an extra rate may 
have the effect of increasing his distress, but cannot have the 
effect of lessening it : allowing his borrowing at such a rate might 
have the effect of lessening his distress, but could not have the 
effect of increasing it. 

To put a stop to prodigality, if, indeed, it be worth while, I 
know but of one effectual course that can be taken, in addition to 
the incomplete and insufficient courses at present practicable, and 
that is, to put the convicted prodigal under an interdict , as was 
practiced formerly among the Romans, and is still practiced among 
the French, and other nations who have taken the Roman law for 
the groundwork of their own. But to discuss the expediency or 
sketch out the details of such an institution, belongs not to the 
present purpose. 


18 


A DEFENCE OF USURY. 


LETTEB IV. 

REASONS FOR RESTRAINTS — PROTECTION OF INDIGENCE. 

Beside prodigals, there are three other classes of persons, and 
hut three, for whose security I can conceive these restrictive laws 
to have been designed — I mean the indigent, the rashly enter- 
prising, and the simple : those whose pecuniary necessities may 
dispose them to give an interest above the ordinary rate rather 
than not have it, and those who, from rashness, may be disposed to 
venture upon giving such a rate, or from carelessness, combined 
with ignorance, may be disposed to acquiesce in it. 

In speaking of these three different classes of persons, I must 
beg leave to consider one of them at a time : and, accordingly, in 
speaking of the indigent, I must consider indigence, in the first 
place, as untinctured with simplicity. On this occasion I may 
suppose, and ought to suppose, no particular defect in a man’s 
judgment, or*his temper, that should mislead him more than the 
ordinary run of men. He knows what is his interest, as well as 
they do, and is as well disposed and able to pursue it as they are. 

I have already intimated, what I think is undeniable, that there 
are no one, or two, or other limited number of rates of interest 
that can be equally suited to the unlimited number of situations, 
in respect of the degree of exigency, in which a man is liable to 
find himself; insomuch, that to the situation of a man who, by the 
use of money, can make, for example, eleven per cent., six per 
cent, is as well adapted as five per cent, is to the situation of him 
who can make but ten; to that of him who can make twelve per 
cent, seven, and so on. So, in the case of his wanting to save 
himself from a loss (which is what is most likely to be in view 
under the name of exigency), if that loss would amount to eleven 
per cent., six per cent, is as well adapted to his situation as five 
per cent, would be to the situation of him who had but a loss 
amounting to ten per cent, to save himself from by the like means. 
And in any case, though the rate of interest were even so great 
in proportion to the amount of the loss, as to make the clear 
saving amount to no more than one per cent., or any fraction per 


A DEFENCE OF USURY, 


19 


cent.; yet, so long as it amounted to anything, he would be just so 
much the better for borrowing, even on such comparatively disad- 
vantageous terms. If instead of gain, we put any other kind of 
benefit or advantage; if instead of loss we put any other kind of 
mischief or inconvenience of equal value, the result will be the 
same. 

• Suppose a man is in one of these situations, in which it would 
be for his advantage to borrow. But his circumstances are such 
that it would not be worth anybody’s while to lend him at the 
highest rate which it is proposed the law should allow ; in short, he 
cannot get it at that rate. If he thought he could get it at that 
rate, most surely he would not give a higher; he may be trusted 
for that; for, by the supposition, he has nothing defective in his 
understanding. But the fact is, he cannot get it at that loWer 
rate. At a higher rate, however, he could get it; and at that 
rate, though higher, it would be worth his while to get it; so he 
judges, who has nothing to hinder him from judging right; who 
has every motive and every means for forming a right judgment; 
who has every motive and every means for informing himself of 
the circumstances upon which rectitude of judgment, in the case 
in question, depends. The legislator, who knows nothing, nor can 
know anything of any one of all these circumstances, who knows 
nothing at all about the matter, comes and says to him : — “ It 
signifies nothing; you shall not have the money, for it would be a 
mischief to you to borrow it upon such terms.” And this out of 
prudence and loving kindness I There may be worse cruelty ; but 
can there be greater folly? 

The folly of those who persist without reason, as is supposed, in 
not taking advice, has been much expatiated upon ; but the folly 
of those who persist without reason in forcing their advice upon 
others, has been but little dwelt upon, though it is perhaps the 
more frequent and the more flagrant of the two. It is nob often 
that one man is a better judge for another than that other is for 
himself, even in cases where the adviser will take the trouble to 
make himself master of as many of the materials for judging as 
are within the reach of the person to be advised. But the legisla- 


20 


A DEFENCE OF USURY. 


tor is not, cannot be, in the possession of any one of these mate- 
rials. What private can be equal to such public folly ? 

I should now spe^k of the enterprising class of borrowers : those, 
who, when characterized by a single term, are distinguished by 
the unfavorable appellation of projectors; but in what I shall have 
to say of them, I begin to foresee Dr. Smith will bear so material 
a part, that when I come to enter upon that subject, I think to 
take my leave of you, and address myself to him. 


LETTER V. 

REASONS FOR RESTRAINTS — PROTECTION OF SIMPLICITY. 

I come, lastly, to the case of the simple. Here, in the first 
place, I think I am by this time entitled to observe, that no sim- 
plicity short of absolute idiotism. can cause the individual to make 
a more groundless judgment than the legislator would have made 
for him, who, in the circumstances above stated, should pretend to 
confine him to any given rate of interest. 

Another consideration, equally conclusive, is, that were the 
legislators judgment ever so much superior to the individuals, how 
weak soever that may be, the exertion of it on this occasion can 
never be otherwise than useless, so long as there are so many 
similar occasions, as there ever must be, where the simplicity of the 
individual is equally liable to make him a sufferer, and on which 
the legislator cannot interpose with effect, nor has ever so much as 
thought of interposing. 

Buying goods with money or upon credit, is the business of 
every day : borrowing money is the business, only, of some par- 
ticular exigency, which, in comparison, can occur but seldom. 
Regulating the prices of goods in general would be an endless task ; 
and no legislator has ever been weak enough to think of attempting 
it. And supposing he were to regulate the prices, what would 
that signify for the protection of simplicity, unless he were to 
regulate also the quantum of what each man should buy ? Such 


A DEFENCE OF USUEY. 


21 


quantum is ; indeed, regulated, or rather means are taken to pre- 
vent buying altogether ; but in what cases ? in those only where 
the weakness is adjudged to have arrived at such a pitch as to 
render a man utterly unqualified for the management of his affairs : 
in short, when it has arrived at the length of idiocy. 

But in what degree soever a man’s weakness may expose him to 
imposition, he stands much more exposed to it in the way of buying 
goods than in the way of borrowing money. To be informed be- 
forehand of the ordinary prices of all sorts of things a man may 
have occasion to buy, may be a task of considerable variety and 
extent. To be informed of the ordinary rate of interest, is to be 
informed of one single fact, too interesting not to have attracted 
attention, and too simple to have escaped the memory. A few per 
cent, enhancement upon the price of goods, is a matter that may 
easily enough pass unheeded ; but a single per cent, beyond the 
ordinary interest of money, is a stride more conspicuous and start- 
ling than many per cent, upon the price of any kind of goods. 

Even in regard to subjects which, by their importance, would, if 
any, justify a regulation of their price, such as, for instance, land, 
I question whether there ever was an instance where (without 
some such ground as, on the one side, fraud, or suppression of facts 
necessary to form a judgment of the value, or at least ignorance 
of such facts on the other) a bargain was rescinded merely be- 
cause a man had sold too cheap or bought too dear. Were I to 
take a fancy to give a hundred years’ purchase instead of thirty, 
for a piece of land, rather than not have it, I do not think there is 
any court in England, or indeed anywhere else, that would inter- 
pose to hinder me, much less to punish the seller with the loss of 
three times the purchase-money, as in the case of usury. Yet 
when I had got my piece of land, and paid my money, repentance, 
were the law ever so well disposed to assist me, might be unavailing ; 
for the seller might have spent the money, or gone off with it. 
But, in case of borrowing money, it is the borrower always who is 
on the safe side : according to the indefinite or short term for 
which money is lent, any imprudence he may have committed with 
regard to the rate of interest, may be corrected at any time ; if I 
find I have given too high an interest to one man, I have no more 


22 


A DEFENCE OF USURY. 


to do than to borrow of another at a lower rate, and pay off the 
first. If I cannot find anybody to lend me at a lower, there can- 
not be a more certain proof that the first was not in reality too 
high. But of this hereafter. 


LETTEE VI. 

MISCHIEFS OF THE A N T I - U S U R I 0 U S LAWS. 

In the preceding letters I have examined all the modes I can 
think of, in which the restraints imposed by the laws against usury 
can have been fancied to be of service. 

I hope it appears, by this time, that there are no ways in which 
those laws can do any good ; but there are several in which they 
cannot but do mischief. 

The first I shall mention is that of precluding altogether so many 
people from the getting the money they stand in need of to answer 
their respective exigencies. Think what a 'distress it would pro- 
duce, were the liberty of borrowing denied to everybody ; denied 
to those who have such security to offer as renders the rate of 
interest they have to offer a sufficient inducement for a man who 
has money to trust them with it. Just that same sort of distress 
is produced, by denying that liberty to so many people whose 
security (though if they were permitted to add something to that 
rate, it would be sufficient), is rendered insufficient by their being 
denied that liberty. Why the misfortune of not being possessed of 
that arbitrarily exacted degree of security, should be made a 
ground for subjecting a man to a hardship which is not imposed 
on those who are free from that misfortune, is more than I can see. 
To discriminate the former class from the latter, I can see but this 
one circumstance, viz., that their necessity is greater. This it is, 
by the very supposition : for were it not, they could not be (what 
they are supposed to be) willing to give more to be relieved from 
it. In this point of view, then, the sole tendency of the law is to 
heap distress upon distress. 


A DEFENCE OF USUKY. 


23 


A second mischief is that of rendering the terms so much the 
worse to a multitude of those whose circumstances exempt them 
from being precluded altogether from getting the money they have 
occasion for. In this case, the mischief, though necessarily less 
intense than in the other, is much more palpable and conspicuous. 
Those who cannot borrow, may get what they want so long as they 
have anything to sell. But, while, out of loving kindness, or what- 
soever other motive, the law precludes a man from borrowing upon 
terms which it deems too disadvantageous, it does not preclude 
him from selling upon any terms, however disadvantageous. 
Everybody knows that forced sales are attended with loss ; and 
what would be deemed a most extravagant interest bears, in gen- 
eral, no proportion to this loss. When a man’s movables are 
taken in execution, they are, I believe, pretty well sold, if, after all 
expenses are paid, the produce amounts to two-thirds of what it 
would cost to replace them. In this way the providence and 
loving kindness of the law costs him thirty-three per cent, and no 
more, supposing (what is seldom the case) that no more of the 
effects are taken than what is barely necessary to make up the 
money due. If, in her negligence and weakness, she were to suffer 
him to offer eleven per cent, per annum for forbearance, it would 
be three years before he paid what he is charged with in the first 
instance by her wisdom. 

Such being the kindness done by the law to the owner of mov- 
ables, let us see how it fares with him who has an interest in im- 
movables. Before the late war, I think it pretty well agreed 
that thirty years’ purchase for land might be reckoned a medium 
price. During the distress produced by the war, lands which it 
was necessary should be sold, were sold at twenty, eighteen, nay, I 
believe, in some instances, even so low as fifteen years’ purchase. 
If I do not misrecollect, I remember instances of lands put up at 
public auction for which nobody bid so high as fifteen. In many 
instances, villas, which had been bought before the war, or at the 
beginning of it (and in the interval had been improved rather than 
impaired), sold for less than half, or even the quarter of what they 
had been bought for. I dare not here, for my part, pretend to be 
exact; but on this passage, were it worth their notice, Mr. Skinner 


24 


A DEFENCE OF USURY. 


or Mr. Christie could furnish very instructive notes. Twenty 
years’ purchase, instead of thirty, I may be allowed to take, at 
least, for illustration. Suppose an estate, then, of £100 a year, 
clear of taxes, was devised to a man, charged with £1500 with 
interest till the money should be paid. Five per cent, interest, 
the utmost wdiich could be accepted from the owner, did not answer 
the incumbrancer’s purpose ; he chose to have the money. But six 
per cent., perhaps, would have answered his purpose ; if not, most 
certainly it would have answered the purpose of somebody else ; for 
multitudes there were whose purposes were all along answered by 
five per cent. The war lasted, I think, seven years ; the deprecia- 
tion of the value of land did not take place immediately; but as, 
on the other hand, neither did it immediately recover its former 
price upon the peace (if indeed it has even yet recovered it), we 
may put seven years for the time during which it would be more 
advantageous to pay this extraordinary rate of interest than sell 
the land, and during which, accordingly, this extraordinary rate of 
interest would have had to run. One per cent, for seven years, is 
not quite of equal worth to seven per cent, the first year; say, how- 
ever, that it is. The estate, which before the war was worth thirty 
years’ purchase, that is £3000, and which the devisor had given to 
the devisee for that value, being put up to sale, sold for but twenty 
years’ purchase, £2000. At the end of that period, it would have 
sold for its original value, £3000. Compare, then, the situation of 
the devisee at the seven years’ end, under the law, with what it 
would have been without the law. In the former case, the land 
selling for twenty years’ purchase, i. e., £2000, what he would have 
after paying the £1500 is £500; which, with the interest of that 
sum, at five per cent., for seven years, viz.: £175 makes, at the 
end of that seven years, £675. In the other case, paying six per 
cent, on the £1500, that is £90 a year, and receiving all that time 
the rent of the land, viz., £100 he would have had, at the seven 
years’ end, the amount of the remaining £10, during that period, 
that is, £70 in addition to his £1000 — £675 subtracted from £1070, 
leaves £395. This £395, then, is what he loses out of £1070, almost 
thirty-seven per cent, of his capital, by the loving kindness of the 
law. Make the calculations, and you will find that, by preventing 


A DEFENCE OF USUEY. 


25 


him from borrowing the money at six per cent, interest, it makes 
him nearly as much a sufferer as if he had borrowed it at ten. 

What I have said hitherto is confined to the case of those who 
have present value to give for the money they stand in need of. If 
they have no such value, then, and they succeed in purchasing 
assistance upon any terms, it must he- a breach of the law, their 
lenders exposing themselves to its vengeance; for I speak not here 
of the accidental case of its being so constructed as to be liable to 
evasion. But, even in this case, the mischievous influence of the 
law still pursues them; aggravating the very mischief it pretends 
to remedy. Though it be inefficacious in the way in which the 
legislator wishes to see it efficacious, it is efficacious in the way op- 
posite to that in which he would wish to see it so. The effect of it 
is to raise the rate of interest higher than it would be otherwise, 
and that in two ways. In the first place, a man must, in common 
prudence, as Dr. Smith observes, make a point of being indemnified, 
not only for whatsoever extraordinary risk it is that he runs, inde- 
pendently of the law, but for the very risk occasioned by the law; 
he must be insured, as it were, against the law. This cause would 
operate, were there even as many persons ready to lend upon the 
illegal rate as upon the legal. But this is not the case ; a great 
number of persons are, of course, driven out of this competition by 
the danger of the business; and another great number by the dis- 
repute which has fastened itself upon the name of usurer, under 
cover of these prohibitory laws or otherwise. So many persons, 
therefore, being driven out of the trade, it happens in this branch, 
as it must necessarily in every other, that those who remain have 
the less to withhold them from advancing their terms ; and without 
confederating (for it must be allowed that confederacy in such a 
case is plainly impossible), each one will find it easier to push his 
advantage up to any given degree of exorbitancy, than he would if 
there were a greater number of persons of the same stamp to 
refer to. 

As to the case where the law is so worded as to be liable to be 
evaded, in this case it is partly inefficacious and nugatory, and 
partly mischievous. It is nugatory as to all such whose confidence 
is perfect of its being so; it is mischievous, as before, in regard to 


26 



A DEFENCE OF USUEY. 

all such who fail of possessing that perfect confidence. If the bor- 
rower can find nobody at all who has confidence enough to take 
advantage of the flaw, he stands precluded from all assistance, as 
before; and, though he should, yet the lender’s terms must neces- 
sarily run the higher, in proportion to what his confidence wants of 
being perfect. It is not likely that it should be perfect ; it is still 
less likely that he should acknowledge it so to be: it is not likely, 
at least, as matters stand in England, that the worst-penned law 
made for this purpose should be altogether destitute of effect; and 
while it has any, that effect, we see, must be in one way or other 
mischievous. 

I have already hinted at the disrepute, the ignomy, the reproach, 
which prejudice (the cause and the effect of these restrictive laws) 
has heaped upon that perfectly innocent and even meritorious class 
of men, who, not more for their own advantage than to the relief 
of the distresses of their neighbor, may have ventured to break 
through these restraints. It is certainly not a matter of indiffer- 
ence that a class of persons who (in every point of view in which 
their conduct can be placed, whether in relation to their own inter- 
est or in relation to that of the persons whom they have to deal 
with, as well on the score of prudence as on that of beneficence — 
and of what use is even benevolence, but in as far as it is product- 
ive of beneficence ?) deserve praise rather than censure should be 
classed with the abandoned and profligate, and loaded with a de- 
gree of infamy which is due to those only whose conduct is in its 
tendency the most opposite to their own. 

“This suffering,” it may be said, “having already been taken 
account of, is not to be brought to account a second time : they are 
aware, as you yourself observe, of this inconvenience, and have 
taken care to get such amends for it as they themselves look upon 
as sufficient.” True ; but is it sure that the compensation, such as 
it is, will always, in the event, have proved a sufficient one? Is 
there no room here for miscalculation ? May there not be unex- 
pected, unlooked-for incidents, sufficient to turn into bitterness the 
utmost satisfaction which the difference of pecuniary emolument 
could afford ? For who can see to the end of that inexhaustible 
train of consequences that are liable to ensue from the loss of 


A DEFENCE OF USURY. 


27 


reputation ? Who can fathom the abyss of infamy ? At any rate, 
this article of mischief, if not an addition in its quantity to the 
others above noticed, is at least distinct from them in its nature, 
and as such ought not to be overlooked. 

Nor is the event of the execution of the law by any means an 
unexampled one ; several such, at different times, have fallen within 
my notice. Then comes absolute perdition ; loss of character, and 
forfeiture, not of three times the -extra interest which formed the 
profit of the offence, but of three times the principal which gave 
occasion to it. 

The last article I have to mention in the account of the mischief, 
is the corruptive influence exercised by these laws on the morals 
of the people, by the pains they take,, and cannot but take, to give 
birth to treachery and ingratitude. To purchase a possibility of 
being enforced, the law neither has found, nor, what is very mate- 
rial, must it ever hope to find in this case, any other expedient than 
that of hiring a man to break his engagement , and to crush the 
hand that has been reached out to help him. In the case of 
informers in general, there has been no troth plighted nor benefit 
received. In the case of real criminals invited by rewards to 
inform against accomplices, it is by such breach of faith that 
society is held together, as in other cases by the observance of it. 
In the case of real crimes, in proportion as their mischievousness 
is apparent, what cannot but be manifest even to criminals is, that 
it is by the adherence to his engagement that he would do an 
injury to society, and that by the breach of such engagement, 
instead of doing mischief, he is doing good : in the case of usury, 
this is what no man can know, and what one can scarcely think it 
possible for any man to imagine, who, in the character of the bor- 
rower, has been concerned in such transaction. He knew that, 
even in his own judgment, the engagement was a beneficial one 
to himself, or he .would not have entered into it : and nobody else 
but the lender is affected by it. 


28 


A DEFENCE OF USURY. 


LETTER VII. 

INEFFICACY OF ANT I-U SURIOUS LAWS. 

Before I quit altogether the consideration of the case in which a 
law, made for the purpose of limiting the rate of interest, may be 
inefficacious with regard to that end, I cannot forbear taking some 
further notice of a passage of Dr. Smith, already alluded to, 
because, to my apprehension, that passage seems to throw upon the 
subject a degree of obscurity which I could wish to see cleared up 
in a future edition of that valuable work. 

“No law” (says he, b. ii, ch. 10, vol. ii, p. 45, edit. 8vo, 1784), 
“ can reduce the common rate of interest below the lowest ordinary 
market rate at the time when that law was made. Notwithstand- 
ing the edict of 1766, by which the French king attempted to 
reduce the rate of interest from five to four per cent, money con- 
tinued to be lent in France at five per cent., the law being evaded 
in several different ways.” 

As to the general position, if so it be, so much the better ac- 
cording to me, but I must confess I do not see why this should be 
the case. It is for the purpose of proving the truth of this gene- 
ral position, that the fact of the inefficacy of this attempt seems to 
be adduced, for no other proof is adduced but this. But, taking 
the fact for granted, I do not see how it can be sufficient to support 
the inference. The law, we are told at the same time, was evaded ; 
but are not told how it came to be open to evasion. It might be 
owing to a particular defect in the penning of that particular law; 
or, what comes to the same thing, in the provisions made for carry- 
ing it into execution. In either case, it affords no support to the 
general position; nor can that position be a just one, unless it were 
so in the case where every provision had been made that could be 
made for giving efficacy to the law. For the position to be true, 
the case must be, that the law would still be broken, even after 
every means of what can properly be called evasion had been 
removed. True or untrue, the position is certainly not self-evident 
enough to be . received without proof ; yet nothing is adduced in 


A DEFENCE OF USURY. 


29 


proof of it but the fact above noticed, which we see amounts to no 
such thing. What is more, I should not expect to find it capable 
of proof. I do not see what it is that should render the law inca- 
pable of “ reducing the common rate of interest below the lowest 
ordinary market rate/’ but such a state of things, such a combi- 
nation of circumstances, as should afford obstacles equally power- 
ful, or nearly so, to the efficacy of the law against all higher rates. 
I know nothing that could serve for destroying the efficacy of the 
law altogether, but a resolution on the part of all persons any way 
privy not to inform ; but by such a resolution, any higher rate is 
just as effectually protected as any lower one. Suppose it, strictly 
speaking, universal, and the law must, in all instances, be equally 
inefficacious ; all rates of interest are equally free ; and the state 
of mens dealings in this way just what it would be, were there no 
law at all upon the subject. But in this case, the position, in as 
far as it limits the inefficacy of the law to those rates which are 
below the “ lowest ordinary market rate,” is not true. For my 
part, I cannot conceive how any such universal resolution could 
have been maintained, or could ever be maintained, without an 
open concert, and as open a rebellion against government; nothing 
of which sort appears to have taken place; and, as to any particular 
confederacies, they are as capable of protecting any higher rates 
against the prohibition, as any lower ones. 

Thus much, indeed, must be admitted, that the low rate in ques- 
tion, viz., that which was the lowest ordinary market rate immedi- 
ately before the making of the law, is likely to come in for the 
protection of the public against the law, more frequently than any 
other rate. That must be the case, on two accounts; first, because, 
by being of the number of the ordinary rates, it was, by the suppo- 
sition, more frequent than any extraordinary ones; secondly, 
because the disrepute annexed to the idea of usury, a force which 
might have more or less efficacy in excluding such extraordinary 
rates from the protection above spoken of, cannot well be supposed 
to apply itself, or at least not in equal degree, to this low and ordi- 
nary rate. A lender has certainly less to stop him from taking a 
rate which may be taken without disrepute, than from taking one 
which a man could not take without subjecting himself to that 


30 


A DEFENCE OF USURY. 


inconvenience; nor is it likely that men’s imaginations and senti- 
ments should testify so sudden an obsequiousness to the law, as to 
stamp disrepute to-day upon a rate of interest to which no such 
accompaniment had stood annexed the day before. 

Were I to be asked how I imagined the case stood in the par- 
ticular instance referred to by Dr. Smith, judging from his account 
of it, assisted by general probabilities, I should answer thus : — 
The law, I should suppose, was not so penned as to be altogether 
proof against evasion. In many instances, of which it is impossi- 
ble any account should have been taken, it was indeed conformed 
to ; in some of those instances, people who would have lent other- 
wise, abstained from lending altogether ; in other of those instances, 
people lent their money at the reduced legal rate. In other 
instances, again, the law was broken ; the lenders trusting partly 
to expedients recurred to for evading it, partly to the good faith 
and honor of those whom they had to deal with; in this class of 
instances it was natural, for the two reasons above suggested, that 
those where the old legal rate was adhered to should have been 
the most numerous. From the circumstance,' not only of their 
number, but of their more direct repugnancy to the particular recent 
law in question, they would naturally be the most taken notice of. 
And this, probably, was the foundation, in point of fact, for the 
Doctor’s general position above mentioned, that “no law can reduce 
the common rate of interest below the lowest ordinary market rate 
at the time when that law was made.” 

In England, as far as I can trust my judgment and imperfect 
general recollection of the purport of the laws relative to this 
matter, I should not suppose that the above position would prove 
true. That there is no such thing as any palpable and universally 
notorious, as well as universally practicable receipt for that pur- 
pose, is manifest from the examples of conviction upon these 
statutes which, as I have already mentioned, every now and then 
occur. Two such receipts, indeed, I shall have occasion to touch 
upon presently; but they are either not obvious enough in their 
nature, or too troublesome, or not extensive enough in their appli- 
cation, to have despoiled the law altogether of its terrors or of its 
preventive efficacy. 


A DEFENCE OF USURY. 


31 


In the country in which I am writing, the whole system of laws 
on this subject is perfectly, and very happily, inefficacious. The 
rate fixed by law is five per cent. ; many people lend money, and 
nobody at that rate ; the lowest ordinary rate, upon the very best 
real security, is eight per cent. ; nine, and even ten, upon such 
security, are common. Six or seven may have place, now and 
then, between relations or other particular friends; because, now 
and then, a man may choose to make a present of one or two 
per cent, to a person whom he means to favor. The contract is 
renewed from year to year; for a thousand roubles, the borrower, 
in his written contract, obliges himself to pay at the end of the 
year one thousand and fifty. Before witnesses he receives his 
thousand roubles; and without witnesses, he immediately pays 
back his thirty roubles, or his forty roubles, or whatever the sum 
may be, that is necessary to bring the real rate of interest to the 
rate verbally agreed on. 

This contrivance, I take it, would not do in England ; but why 
it would not, is a question which it would be in vain for me to pre- 
tend to discuss at this distance from all authorities. 


32 


A DEFENCE OF USURY. 


LETTER VIII. 

VIRTUAL USURY ALLOWED. 

Having proved, as I hope, by this time, the utter impropriety of 
the law’s limiting the rate of interest, in every case that can be 
conceived, it may be rather a matter of curiosity than anything 
else, to inquire how far the law is consistent with itself, on this 
head, and with any principles upon which it can have built. 

1. Drawing and redrawing is a practice which it will be suffi- 
cient here to hint at. It is perfectly well known to all merchants, 
and may be so to all who are not merchants, by consulting Dr. 
Smith. In this way he has shown how money may be, and has 
been, taken up at so high a rate as thirteen or fourteen per cent., a 
rate nearly three times as high as the utmost which the law pro- 
fesses to allow. The extra interest is, in this case, masked under 
the names of commission and price of exchange. The commission 
is but small upon each loan, not more, I think, than one-half per 
cent. ; custom having stretched so far, but no further, it might be 
thought dangerous, perhaps, to venture upon any higher allowance 
under that name. The charge being repeated a number of times 
in the course of the year, makes up in frequency what it wants in 
weight. The transaction is, by this shift, rendered more trouble- 
some indeed, but not less practicable, to such parties as are agreed 
about it. But if usury is good for merchants, I do not very well 
see what should make it bad for everybody else. 

2. At this distance from all the fountains of legal knowledge, I 
will not pretend to say whether the practice of selling accepted bills 
at an under value would hold good against all attacks. It strikes 
my recollection as a pretty common one, and I think it could not be 
brought under any of the penal statutes against usury. The 
adequateness of the consideration might, for aught I know, be 
attacked with success in a court of equity ; or, perhaps, if there 
were sufficient evidence (which the agreement of the parties might 
easily prevent) by an action at common law for money had and 
received. If the practice be really proof against all attacks, it 


A DEFENCE OF USURY. 


33 


seems to afford an effectual and pretty commodious method of evad- 
ing the restrictive laws. The only restraint is, that it requires 
the assistance of a third person, a friend of the borrower ; as, for 
instance, B, the real borrower, wants £100, and finds U, a usurer, 
who is willing to lend it to him at ten per cent. ; B has F, a friend, 
who has not the money himself to lend him, but is willing to stand 
security for him to that amount. B therefore draws upon F, and 
F accepts a bill of £100, at five per cent, interest, payable at the 
end of a twelvemonth from the date. F draws a like bill upon B ; 
each sells his bill to U for £50 ; and it is endorsed to U accord- 
ingly. The £50 that F receives, he delivers over, without any 
consideration, to B. This transaction, if it be a valid one, and if a 
man can find such a friend, is evidently much less troublesome 
than the practice of drawing and redrawing. And this, if it be 
practicable at all, may be practiced by persons of any description, 
concerned or not in trade. Should the effect of this page be to 
suggest an expedient, and that a safe and commodious one, for 
evading the laws against usury, to some to whom such an expedient 
might not otherwise have occurred, it will not lie very heavy upon 
my conscience. The prayers of usurers, whatever efficacy they 
may have in lightening the burden, I hope I may lay some claim; 
to. And I think you will not now wonder at my saying, that im 
the efficacy of such prayers I have not a whit less confidence than 
in that of the prayers of any other class of men. 

One apology I shall have to plead, at any rate, that in pointing 
out these flaws to the individual who may be disposed to creep out 
at them, I point them out at the same time to the legislator in 
whose power it is to stop them up, if, in his opinion, they require it. 
If, notwithstanding such opinion, he should omit to do so, the 
blame will lie, not on my industry, but on his negligence. 

These, it may be said, should they even be secure and effectual 
eyasions, are still but evasions, and, if chargeable upon the law at 
all, are chargeable not as inconsistencies but as oversights. Be it 
so. Setting these aside, then, as expedients practiced or practic- 
able only behind its back, I will beg leave to remind you of two 
others, practiced, from time to time, under its protection and 
before its face. 


■ 34 A.DEFENCE OF USURY. 

The first I shall mention is pawnbroking. In this case there is 
the less pretence for more than ordinary interest, inasmuch as the 
. security is not only equal to, but better than, what it can be in any 
other : to wit, the present possession of a movable thing of easy 
sale, on which the. creditor has the power, and certainly does not 
want the inclination, to set such price as is most for his advantage. 
If there be a case in which the allowing of such extraordinary interest 
is attended with more danger than another, it must be this, which 
is so particularly adapted to the situation of the lowest poor — that 
is, of those who (on the score of indigence or simplicity, or both) 
are most open to imposition. This trade, however, the law, by 
regulating, avowedly protect^. What the rate of interest is 
which it allows to be taken in this way, I cannot take upon me to 
remember; but I am much deceived if it amounts to less than 
twelve per cent, in the year, and I believe it amounts to a good 
deal more. Whether it were twelve per cent, or twelve hundred, 

. I believe would make in practice but little difference. What com- 
mission is in the business of drawing and redrawing, warehouse 
room is in that of pawnbroking. Whatever limits, then, are set to 
the profits of this trade, are set, perhaps, not by the vigilance of 
the law, but, as in the case of other trades, by the competition 
among the traders. Of the other regulations contained in the acts 
relative to this subject, I recollect no reason to doubt the use. 

The other instance is that of bottomry and respondentia ; for 
the two transactions, being so nearly related, may be spoken of 
together. Bottomry is the usury of pawnbroking ; respondentia 
is usury at large, but combined in a manner with insurance, and 
employed in the assistance of a trade carried on by sea. If any 
species of usury is to be condemned, I see not on what grounds 
this particular species can be screened from the condemnation. 
“ 0, but (says Sir William Blackstone, or anybody else who takes 
upon himself the task of finding a reason for the law) this is a 
maritime country, and the trade which it carries on by sea is the 
great bulwark of its defence.” It is not necessary I should here 
inquire whether that branch (which, as Dr. Smith has shown, is, 
in every view hut the mere one of defence, less beneficial to a 
nation than two others out of the four branches which compre- 


A DEFENCE OF USURY. 


35 


Lend all trade) has any claim to be preferred to them in this or 
any other way. I admit that the liberty which this branch of 
trade enjoys is no more than what it is perfectly right it should 
enjoy. What I want to know is, what there is in the class of men 
embarked in this trade that should render a liberty beneficial to 
them which would be ruinous to everybody else. Is it that sea 
adventures have less hazard in them than land adventures ? or 
that the sea teaches those who have to deal with it a degree of 
forecast and reflection which has been denied to landmen ? 

It were easy enough to give further and further extension to 
this charge of inconsistency, by bringing under it the liberty given 
to insurance in all its branches, to the purchase and sale of 
annuities, and of post-obits, in a word, to all cases where a man is 
permitted to take upon himself an unlimited degree of risk, 
receiving for so doing an unlimited compensation. Indeed, I know 
not where the want of instances would stop me : for, in what part 
of the magazine of events about which human transactions are 
conversant, is certainty to be found ? But to this head of argument 
— this argument ad hominem, as it may be called, the use of 
which is but subsidiary, and which has more of confutation in it 
than of persuasion or instruction, I willingly put an end. 


i 


36 


A DEFENCE OF USURY. 


LETTER IX. 

BLACKSTONE CONSIDERED. 

I hope you are, by this time, at least, pretty much of my 
opinion, that there is just the same sort of harm, and no other, in 
making the best terms one can for one's self in a money loan, as 
there is in any other sort of bargain. If you are not, Blacks tone, 
however, is, whose opinion I hope you will allow to be worth 
something. In speaking of the rate of interest (b. ii. ch. 13), he 
starts a parallel between a bargain for the loan of money and a 
bargain about a horse, and pronounces, without hesitation, that 
the harm of making too good a bargain is just as great in the one 
case as in the other. As money-lending, and not horse-dealing, 
was what you lawyers call the principal case, he drops the horse 
business as soon as it has answered the purpose of illustration 
which it was brought to serve. But as, in my conception, as 
well the reasoning by which he supports the decision, as that by 
which anybody else could have supported it, is just as applicable 
to the one sort of bargain as to the other, I will carry on the 
parallel a little further, and give the same extent to the reasoning 
as to the position which it is made use of to support. This exten- 
sion will not be without its use : for, if the position when thus 
extended should be found just, a practical inference will arise; 
which is, that the benefits of these restraints ought to be extended 
from the money-trade to the horse-trade. That my own opinion 
is not favorable to such restraints in either case, has been suffi- 
ciently declared ; but if more respectable opinions than mine are 
still to prevail, they will not be less respectable for being con- 
sistent. 

The sort of bargain which the learned commentator has hap- 
pened to pitch upon for the illustration, is, in the case illustrating, 
as in the case illustrated, indeed, a loan : but as, to my apprehen- 
sion, loan or sale makes, in point of reasoning, no sort of difference, 
and as the utility of the conclusion will, in the latter case, be more 
extensive, I shall adapt the reasoning to the more important busi- 


A DEFENCE OF USURY. 


37 


ness of selling horses, instead of the less important one of lending 
them. 

A circumstance that would render the extension of these re- 
straints to the horse-trade more smooth and easy, is, that in the 
one track as well as in the other, the public has already got the 
length of calling names. Jockey-ship , a term of reproach not less 
frequently applied to the arts of those who sell horses than to the 
arts of those who ride them, sounds, I take it, to the ear of many 
a worthy gentleman, nearly as bad as usury : and it is well known 
to all those who put their trust in proverbs, and not less to those 
who put their trust in party, that when we have got a dog to hang 
who is troublesome and keeps us at bay, whoever can contrive to 
fasten a bad name to his tail has gained more than half the battle. 
I now proceed with my application. The words in italics are my 
own: all the rest are Sir William Blackstone’s ; and I restore (in 
parentheses) the words I was obliged to discard, in order to make 
room for mine. 

“To demand an exorbitant price is equally contrary to con- 
science, for the loan of a horse, or for the loan of a sum of money : 
but a reasonable equivalent for the temporary inconvenience which 
the owner may feel by the want of it, and for the hazard of his 
losing it entirely, is not more immoral in one case than in the 
other. * * * * 

“As to selling horses , a capital distinction must be made, between 
a moderate and an exorbitant profit : to the former of which we 
give the name of horse dealing (interest), to the latter the truly 
odious appellation of jockey-ship (usury) : the former is necessary 
in every civil state, if it were but to exclude the latter. For, as 
the whole of this matter is well summed up by Grotius, if the 
compensation allowed by law does not exceed the proportion 
of the inconvenience which it is to the seller of the horse to part 
with it (hazard run), or the want which the buyer has of it (felt by 
the loan), its allowance is neither repugnant to the revealed law 
nor to the natural law : but if it exceeds these bounds, it is then 
an oppressive jockey-ship (usury) : and though the municipal laws 
may give it impunity, they never can make it just. 

“ We see that the exorbitance or moderation of the price given 


38 


A DEFENCE OF USURY. 


for a horse (interest for the money lent) depends upon two circum- 
stances : upon the inconvenience of parting with the horse one has 
(it for the present), and the hazard of not being able to meet with 
such another (losing it entirely). The inconvenience to individual 
sellers of horses (lenders), can never be estimated by laws ; the 
general price for horses (rate of general interest), must depend, 
therefore, upon the usual or general inconvenience. This results 
entirely from the quantity of horses (money) in the kingdom : for 
the more horses (specie) there are running about (circulating) in 
any nation, the greater superfluity there will be beyond what is 
necessary to carry on the business of the mail coaches (exchange) 
and the common concerns of life. In every nation or public com- 
munity there is a certain quantity of horses (money), then, necessary, 
which a person well skilled in political arithmetic might, perhaps, 
calculate as exactly as a private horse dealer (banker) can the demand 
for the running horses in his own stables (cash in his own shop) : 
all above this necessary quantity may be spared, or lent, or sold , 
without much inconvenience to the respective lenders or sellers : 
and the greater the national superfluity is, the more numerous will 
be the sellers (lenders), and the lower ought the national jprice of 
horse flesh (the rate of the national interest) to be : but where 
there are riot enough, or barely enough spare horses (circulating 
cash) to answer the ordinary uses of the public, horse flesh (interest) 
will be proportionably high : for sellers (lenders) will be but few, as 
few can submit to the inconvenience of selling ” (lending. So far 
the learned commentator. 

I hope, by this time, you are worked up to a proper pitch of in- 
dignation at the neglect and inconsistency betrayed by the law, in 
not suppressing this species of jockey ship, which it would be so 
easy to do only by fixing the price of horses. Nobody is less dis- 
posed than I am, to be uncharitable ; but when one thinks of the 
£1500 taken for Eclipse, and £2000 for Rockingham, and so on, 
who can avoid being shocked, to think how little regard those who 
took such enormous prices must have had for “ the law of revela- 
tion and the law of nature ?” Whoever it is that is to move for 
the municipal law, not long ago talked of, for reducing the rate of 
interest, whenever that motion is made, then would be the time for 


A DEFENCE OF USURY. 


39 


one of the Yorkshire members to get up, and move, by way of ad- 
dition, for a clause for fixing and reducing the price of horses. I 
need not expatiate on the utility of that valuable species of cattle, 
which might have been as cheap as asses before now, if our law- 
givers had been as mindful of their duty in the suppression of 
jockey -ship, as they have been in the suppression of usury. 

It may be said, against fixing the price of horse-flesh, that dif- 
ferent horses may be of different values. I answer — and I think I 
shall show you as much when I come to touch upon the subject of 
champerty — not more different than the values which the use of 
the same sum of money may be of to different persons, on different 
occasions. 


40 


A DEFENCE OF USURY. 


LETTEB X. 

GROUNDS OF THE PREJUDICES AGAINST USURY. 

It is one thing to find reasons why it is fit a law should have 
been made ; it is another to find the reasons why it was made ; 
in other words, it is one thing to justify a law — it is another 
thing to account for its existence. In the present instance the 
former task, if the observations I have been troubling you with 
are just, is an impossible one. The other, though not necessary 
for conviction, may contribute something, perhaps, in the way of 
satisfaction. To trace an error to its fountain head, says Lord 
Coke, is to refute it ; and many men there are who, till they 
have received this satisfaction, be the error what it may, can- 
not prevail upon themselves to part with it. “ If our ancestors 
have been all along under a mistake, how came they to have 
fallen into it ?” is a question that naturally presents itself upon 
such occasions. The case is, that in matters of law more es- 
pecially, such is the dominion of authority over our minds, and 
such the prejudice it creates in favor of whatever institution it 
has taken under its wing, that, after all manner of reasons that 
can be thought of in favor of the institution have been shown 
to be insufficient, we still cannot forbear looking to some unas- 
signable and latent reason for its efficient cause. But if, in- 
stead of any such reason, we can find a cause for it in some 
notion, of the erroneousness of which we are already satisfied, 
then at last we are content to give it up without further strug- 
gle ; and then, and not till then, our satisfaction is complete. 

In the conceptions of the more considerable part of those 
through whom our religion has been handed down to us, virtue, 
or rather godliness, which was an improved substitute for vir- 
tue, consisted in self-denial : not in self-denial for the sake of 
society, but of self-denial for its own sake. One pretty general 
rule served for most occasions, not to do what you had a mind 
to do ; or, in other words, not to do what would be for your 

t 


A DEFENCE OF USURY. 


41 


advantage. By this, of course, was meant temporal advantage, 
to which spiritual advantage was understood to be in constant 
and diametrical opposition ; for the proof of a resolution on the 
part of a being of perfect power and benevolence, to make his 
few favorites happy in a state in which they were to be, was his 
determined pleasure that they should keep themselves as much 
strangers to happiness as possible in a state in which they were. 
Now to get money is what most men have a mind to do, because 
he who has money gets, as far as it goes, most other things that 
he has a mind for. Of course, nobody was to get money; in- 
deed, why should he, when he was not so much as to keep 
what he had got already ? To lend money at interest is to get 
money, or at least to try to get it ; of course, it was a bad thing 
to lend money upon such terms. The better the terms the 
worse it was to lend upon them ; v but it was bad to lend upon 
any terms by which anything could • be got. What made it 
much the worse was, that it was acting like a Jew, for though 
all Christians at first were Jews, and continued to do as Jews 
did after they had become Christians, yet in process of time it 
came to be discovered that the distance between the mother 
and the daughter church could not be too wide. 

By degrees, as old conceits gave place to new, nature so far 
prevailed that the objections to getting money in general were 
pretty well overruled, but still this Jewish way of getting it 
was too odious to be endured. Christians were too intent upon 
plaguing Jews to listen to the suggestions of doing as Jews did, 
even though money were to be got by it. Indeed, the easier 
method, and a method pretty much in vogue, was, to let the 
Jews get the money anyhow they could, and then squeeze it out 
of them as it was wanted. 

In process of time, as questions of all sorts came under dis- 
cussion, and this not the least interesting among the rest, the 
anti-Jewish side of it found no inopportune support in a passage 
of Aristotle, that celebrated heathen, who, in all matters where- 
in heathenism did not destroy his competence, had established 
a despotic empire over the Christian world. As fate would 


42 


A DEFENCE OF USURY. 


have it, that great philosopher, with all his industry and all 
his penetration, notwithstanding the great number of pieces of 
money that had passed through his hands (more perhaps than 
ever passed through the hands of a philosopher before or since), 
and notwithstanding the uncommon pains he had bestowed on 
the subject of generation, had never been able to discover in any 
one piece of money any organs for generating any other such 
piece. Emboldened by so strong a body of negative proof, he 
ventured at last to usher into the world the result of his obser- 
vations in the form of an universal proposition, that all money 
is in its nature barren. You, my friend, to whose cast of mind 
sound reason is much more congenial than ancient philosophy, 
you have, I dare to say, gone before me in remarking that the 
practical inference from this shrewd observation, if it afforded 
any, should have been, that it would be to no purpose for a man 
to try to get five per cent, out of money — not, that if he could 
contrive to get so much, there would be any harm in it. But 
the sages of those days did not view the mmtter in that light. 

A consideration that did not happen to present itself to that 
great philosopher, but which, had it happened to present itself, 
might not have been altogether unworthy of his notice, is, that 
though a daric would not beget another daric any more than it 
would a ram or an ewe, yet for a daric which a man borrowed 
he might get a ram and a couple of ewes, and that the ewes, 
were the ram left them a certain time, would probably not be 
barren. That then, at the end of the year, he would find him- 
self master of his three sheep, together with two, if not three 
lambs ) and that if he sold his sheep again to pay back his daric, 
and gave one of his lambs for the use of it in the meantime, he 
would be two lambs, or at least one lamb, richer than if he had 
made no such bargain. 

These theological and philosophical conceits, the offspring of 
the day, were not ill seconded by principles of a more perma- 
nent complexion. 

The business of a money-lender, though only among Chris- 
tians and in Christian times a proscribed profession, has no 


! 


A DEFENCE OF USURY. 43 

where, nor at any time, been a popular one. Those who have 
the resolution to sacrifice the present to the future, are natural 
objects of envy to those who have sacrificed the future to the 
present. The children who have eaten their cake are the nat- 
ural enemies of the children who have theirs. While the money 
is hoped for, and for a short time after it has been received, 
he who lends it is a friend and benefactor ; by the time the. 
money is spent and the evil hour of reckoning is come, the ben- 
efactor is found to have changed his nature, and to have put on 
the tyrant and the oppressor. It is an oppression for a man to 
reclaim his own money ; it is none to keep it from him. Among 
the inconsiderate — that is, among the great mass of mankind, 
selfish affections conspire with the social in treasuring up all 
favor for the man of dissipation, and in refusing justice to the 
man of thrift who has supplied him. In some shape or other 
that favor attends the chosen object of it through every stage 
of his career. But in no stage of his career can the man of 
thrift come in for any share of it. It is the general interest of 
those with whom a man lives, that his expense should be at 
least as great as his circumstances will bear, because there are 
few expenses which a man can launch into but what the benefit 
of them is shared in some proportion or other by those with 
whom he lives. In that circle originates a standing law forbid- 
ding every man, on pain of infamy, to confine his expenses 
within what is adjudged to be the measure of his means, saving 
always the pow T er of exceeding that limit as much as he thinks 
proper, and the means assigned him by that law may be ever 
so much beyond his real means, but are sure never to fall short 
of them. So close is the combination thus formed between the 
idea of merit and the idea of expenditure, that a disposition to 
spend finds favor in the eyes even of those who know that a 
man’s circumstances do not entitle him to the means, and an 
upstart, whose chief recommendation is this disposition, shall 
find himself to have purchased a permanent fund of respect, to 
the prejudice of the very persons at whose expense he has been 
gratifying his appetites and his pride. The lustre which the 


44 


A DEFENCE OF USURY. 


display of borrowed wealth has diffused over his character awes 
men, during the season of his prosperity, into a submission to 
his insolence, and when the hand of adversity has overtaken 
him at last, the recollection of the height from which he has 
fallen throws the veil of compassion over his injustice. 

The condition of the man of thrift is the reverse. His lasting 
opulence procures him a share at least of the same envy that 
attends the prodigal’s transient display, but the use he makes 
of it procures him no part of the favor which attends the prodi- 
gal. In the satisfactions he derives from that use — the pleasure 
of possession — and the idea of enjoying at some distant period, 
which may never arrive, nobody comes in for any share. In 
the midst of his opulence he is regarded as a kind of insolvent, 
who refuses to honor the bills which their rapacity would draw 
upon him, and who is by so much the more criminal than other 
insolvents, as not having the plea of inability for an excuse. 

Could there be any doubt of the disfavour which attends the 
cause of the money-lender in his competition with the borrower, 
and of the disposition of the public judgment to sacrifice the 
interest of the former to that of the latter, the stage would 
afford a compendious, but a pretty conclusive proof of it. It 
is the business of the dramatist to study and to conform to the 
humours and passions of those on the pleasing of whom he 
depends for his success : it is the course which reflection must 
suggest to every man, and which a man would naturally fall 
into, though he were not to think about it. He may, and very 
frequently does, make magnificent pretences of giving the law 
to them ; but woe be to him that attempts to give them any 
other law than what they are disposed already to receive. If 
he would attempt to lead them one inch, it must be with great 
caution, and not without suffering himself to be led by them at 
least a dozen. Now, I question whether, among all the instances 
in which a borrower and a lender of money have been brought 
together upon the stage, from the days of Thespis to the present, 
there ever was one in which the former was not recommended 
to favour, in some shape or other, either to admiration, or to 


A DEFENCE OF USURY. 


45 


love, or to pity, or to all three ; and the other, the man of thrift, 
consigned to infamy. 

Hence it is that, in reviewing and adjusting the interests of 
these apparently rival parties, the advantage made by the 
borrower is so apt to slip out of sight, and that made by the 
lender to appear in so exaggerated a point of view. Hence it 
is, that though prejudice is so far softened as to acquiesce in 
the lenders making some advantage, lest the borrower should 
lose altogether the benefit of his assistance, yet, still the bor- 
rower is to have all the favour, and the lender’s advantage is for- 
ever to be clipped and pared down as low as it will bear. First 
it was to be confined to ten per cent., then to eight, then to six, 
then to five, and now lately, there was a report of its being to 
be brought down to four ; with constant liberty to sink as much 
lower as it would. The burden^of these restraints, of course, 
has been intended exclusively for the lender : in reality, as I 
think you have seen, it presses much more heavily upon the 
borrower ; I mean him who either becomes, or in vain wishes 
to become so. But the presents directed by prejudice, Dr. Smith 
will tell us, are not always delivered according to their address. 
It was thus, that the millstone designed for the necks of those 
vermin (as they have been called), the dealers in corn, was 
found to fall upon the heads of the consumers. It is thus — but 
farther examples would lead me farther from the purpose. 


LETTER XI. 

COMPOUND INTEREST. 

A WORD or two I must trouble you with, concerning compound 
interest ; for compound interest is discountenanced by the law ; 
I suppose as a sort of usury. That the law never gives it, with- 
out an express stipulation, I well remember ; whether the law 
allows it to be taken in case of an express stipulation, I am not 
absolutely certain. I should suppose it might ; remembering 


46 


A DEFENCE OF USURY. 


covenants in mortgages that interest should become principal. 
At any rate, I think the law cannot well punish it under the 
name of usury. 

If the discountenance shown to this arrangement be grounded 
on the horror of the sin of usury, the impropriety of such dis- 
countenance follows of course, from the arguments which show 
the unsinfulness of that sin. 

Other argument against it, I believe, was never attempted, 
unless it were the giving to such an arrangement the epithet of 
a hard one ; in doing which, something more like a reason is 
given than one gets in ordinary, from the common law. 

If that consistency were to be found in the common law, 
which has never yet been found in man’s conduct, and which per- 
haps is hardly in man’s nature, compound interest never could 
have been denied. 

The views which suggested this denial, I dare to say, were 
very good; the effects of it are very pernicious, I am certain. 

If the borrower pays the interest at the day, if he performs 
his engagement, that very engagement to which the law pre- 
tends to oblige him to conform, the lender who receives that 
interest makes compound interest of course, by lending it out 
again, unless he chooses rather to expend it ; he expects to 
receive it at the day, or what meant the engagement? If he 
fails of receiving it, he is by so much a loser ; the borrower by 
paying it at the day is no loser; if he does not pay it at the 
day, he is by so much a gainer ; a pain of disappointment takes 
place in the case of the one, while no such pain takes place in 
the case of the other. The cause of him whose contention is to 
catch a gain is thus preferred to that of him whose contention is 
to avoid a loss ; contrary to the reasonable and useful maxim of 
that branch of the common law which has acquired the name 
of equity. The gain, which the law in its tenderness thus 
bestows on the defaulter, is an encouragement — a reward which 
it holds out for breach of faith, for iniquity, for indolence, for 
negligence ! 

The loss which it thus throws upon the forbearing lender is 


A DEFENCE OF USURY. 


47 


a punishment which it inflicts on him for his forbearance ; the 
power which it gives him of avoiding that loss, by prosecuting 
the borrower upon the instant of failure, is thus converted into 
a reward which it holds out to him for his hard-heartedness 
and rigor. Man is not quite so good as it were to be wished 
he were ; but he would be bad indeed, were he bad on all occa- 
sions where the law, as far as depends on her, has made it his 
interest so to be. 

It may be impossible, say you, it often is impossible, for the 
borrower to pay the interest at the day ; and you say truly. 
What is the inference ? That the creditor should not have it in 
his power to ruin the debtor for not paying at the day, and that 
he should receive a compensation for the loss occasioned by such 
failure. He has it in his power to ruin him, and he has it not in 
his power to obtain such compensation. The judge (were it 
possible for an arre ted debtor to find his way into a judge’s 
chamber instead of a spunging-house), might award a proper 
respite suited to the circumstances of the parties. It is not 
possible ; but a respite is purchased, proper or not proper, per- 
haps at ten times, perhaps at a hundred times the expense of 
compound interest by putting in bail, and fighting the creditor 
through all the windings of mischievous and unnecessary delay. 
Of the satisfaction due either for the original failure, or for the 
subsequent vexation by which it has been aggravated, no part 
is ever received by the injured creditor; but the instruments 
of the law receive (perhaps at his expense, perhaps at the debt- 
or’s), perhaps ten times — perhaps a hundred times the amount 
of that satisfaction. Such is the result of this tenderness of the 
law. 

It is in consequence of such tenderness that on so many 
occasions a man, though ever so able, would find himself a loser 
by paying his just debts; those very debts of which the law 
has recognised the justice. The man who obeys the dictates of 
common honesty, the man who does what the law pretends to bid 
him, is wanting to himself. Hence your regular and securely 
profitable writs of error in the House of Lords ; hence your 


48 


A DEFENCE OF USURY. 


random and vindictive costs of one hundred pounds, and two 
hundred pounds, now and then given in that house. It is 
natural, and it is something to find in a company of lords a zeal 
for justice ; it is not natural to find in such a company a dispo- 
sition to bend down to the toil of calculation. 


LETTER XII. 

MAINTENANCE AND CHAMPERTY. 

Having in the preceding letters had occasion to lay down, 
and, as I flatter myself, to make good the general principle, that 
no man of ripe years and of sound mind ought , out of loving- 
kindness to him, to be hindered from making such a bargain in 
the way of obtaining money, as (acting with his eyes open) he 
deems conducive to his interest ; I will take your leave for push- 
ing it a little farther, and extending the application of it to 
another class of regulations still less defensible. I mean the 
antique laws against what are called Maintenance and Cham- 
perty. 

To the head of Maintenance I think you refer, besides other 
offences which, are not to the present purpose, that of purchas- 
ing upon any terms, any claim which it requires a suit at law 
or in equity to enforce. 

Champerty, which is but a particular modification of this sin 
of Maintenance, is, I think, the furnishing a man who has such 
a claim with regard to real estate, such money as he may have 
occasion for to carry on such claim, upon the terms of receiving 
a part of the estate in case of success. 

What the penalties are for these offences, I do not recollect ; 
nor do I think it worth while hunting for them, though I have 
Blacks tone at my elbow. They are, at any rate, sufficiently 
severe to answer the purpose, the rather as the bargain is made 
void. 

To illustrate the mischievousness of the laws by which they 
have been created, give me leave to tell you a story, which is 


A DEFENCE OF USURY. 


49 


but too true a one, which happened to fall within my own ob- 
servation. 

A gentleman of my acquaintenance had succeeded, during 
his minority, to an estate of about 3000£. a year : I will not 
say where. His guardian (concealing from him the value of the 
estate, which circumstances rendered it easy for him to do,) got 
a conveyance of it from him for a trifle during his non-age. 
Immediately upon the ward’s coming of age, the guardian, keep- 
ing him still in darkness, found means to get the conveyance 
confirmed. Some years afterwards, the ward discovered the 
value of the inheritance he had been throwing away. Private 
representations proving ineffectual, as it may be imagined, he 
applied to a court of equity. The suit was in some forward- 
ness : the opinion of the ablest counsel highly encouraging : but 
money there remained none. We all know but too well that, 
in spite of the unimpeachable integrity of the bench, that branch 
of justice which is particularly dignified with the name of equity, 
is only for those who can afford to throw away one fortune for 
the chance of recovering another. Two persons were found, 
however, who between them were content to defray the expense 
of the ticket for this lottery, on condition of receiving half the 
prize. The prospect now became encouraging : when unfortu- 
nately one of the adventurers, in exploring the recesses of the 
bottomless pit, happened to dig up one of the old statutes 
against Champerty. This blew up the whole project : however 
the defendant, understanding that some how or other his antag- 
onist had found support, had thought fit in the mean time to 
propose terms, which the plaintiff, after his support had thus 
dropped from under him, was very glad to close with. He re- 
ceived, I think it was, 3000Z.; and for that he gave up the estate 
which was worth about as much yearly, together with the ar- 
rears which were worth about as much as the estate. 

Whether in the barbarous age which gave birth to these bar- 
barous precautions, whether, even under the zenith of feudal 
anarchy, such fettering regulations could have had reason on 
their side, is a question of curiosity rather than use. My 


50 


A DEFENCE OF USURY. 


notion is, that there never was a time, that there never could 
have been or can be a time, when the pushing of suitors away 
from court with one hand while they are beckoned into it with 
another, would not be a policy equally faithless, inconsistent* 
and absurd. But, what every body must acknowledge, is, that 
to the times which called forth these laws and in which alone 
they could have started up, the present are as opposite as light 
to darkness. A mischief (in those times it seems but too com- 
mon, though a mischief not to be cured by such laws) was, that 
a man would buy a weak claim in hopes that power might con- 
vert it into a strong one, and that the sword of a baron stalk- 
ing into court with a rabble of retainers at his heels, might 
strike terror into the eyes of a judge upon the bench. At pre- 
sent, what cares an English judge for the swords of an hundred 
barons ? Neither fearing nor hoping, hating nor loving, the 
judge of our day is ready with equal phlegm to administer, upon 
all occasions, that system of justice or injustice, whatever it be, 
which the law has put in his hands. A disposition so consonant 
to duty could not have then been hoped for. One more consonant 
is hardly to be wished. Wealth has indeed the monopoly of 
justice against poverty : and such monopoly it is the direct 
tendency and necessary effect of regulations like these to 
strengthen and confirm. But with this monopoly no judge that 
lives now is at all chargeable. The law created this monopoly: 
the law whenever it pleases may dissolve it. 

I will not, however, so far wander from my subject as to in- 
quire what measure might have been necessary to afford a full 
relief to the case of that unfortunate gentleman, any more than 
to the cases of so many other gentlemen who might be found 
as unfortunate as he. I will not insist upon so strange and so 
inconceivable an arrangement, as that of the judge’s seeing both 
parties /face to face in the first instance, observing what the 
facts are in dispute, and declaring that as the facts should turn 
out this way or that way, such or such would be his decree. At 
present, I confine myself to the removal of such part of the 


A DEFENCE OF USURY. 


51 


mischief as may arise from the general conceit of keeping men 
out of difficulties by cutting them off from such means of releif 
as each man’s situation may afford. A spunge in this, as in so 
many other cases, is the only needful and only available remedy; 
one stroke of it for the musty laws against maintenance and 
champerty, another for the more recent ones against usury. 
Consider, for example, what would have respectively been the 
effect of two such strokes in the case of the unfortunate gentle- 
man I have been speaking of. By the first, if what is called 
equity has any claim of confidence, he would have got, even 
after paying off his champerty-usurers, 1500£. a year in land 
and about as much in money, instead of getting, and that only 
by an accident, 3000£. once told. By the other, there is no 
saying to what a degree he might have been benefited. May 
I be allowed to stretch so far ki favor of the law as to suppose, 
that so small a sum as 500Z. would have carried him through 
his suit, in the course of about three years? Iam sensible 
that may be thought but, a short sum, and this is but a short 
term for a suit in equity; but for the purpose of illustration it 
may serve as well as a longer. Suppose he had sought this 
necessary sum in the way of borrowing ; and had been so for- 
tunate, or as the laws against the sin of usury would style it, 
so unfortunate as to get it at 200 per cent. He would then 
have purchased his 60u0£. a year at the price of half as much 
once paid, viz., 30001 . ; instead of selling it at that price. 
Whether, if no such laws against usury had been in being, he 
could have got the money even at that rate, I will not pretend 
to say ; perhaps he might not have got it under ten times that 
rate, perhaps he might have got it at the tenth part of that 
rate. Thus far I think we may say that he might, and proba- 
bly would, have been the better for the repeal of those laws ; 
but thus far we must say, that it is impossible he should have 
been the worse. The terms upon which he met with adven- 
turers willing to relieve him (though they come not within that 
scanty field which the law in the narrowness of its views calls 
usury), do, in the present case (at twenty years’ purchase of 


52 


A DEFENCE OF USURY. 


the 3000£. a year he was content to have sacrificed for such 
assistance), amount, in effect, to 4000 per cent. Whether it 
was likely that any man, who was disposed to venture his 
money at all upon such a chance, would have thought of insist- 
ing upon such a rate of interest, I will leave you to imagine; 
but this much may be said with confidence, because the fact 
demonstrates it, that at a rate not exceeding this the sum ac- 
tually would have been supplied. Whatever becomes, then, of 
the laws against maintenance and champerty, the example in 
question ought, I think, when applied to the laws against usury, 
to be sufficient to convince us that so long as the expense of 
seeking relief at law stands on its present footing, the purpose 
of seeking that relief will of itself, independently of every other, 
afford a sufficient ground for allowing any man or every man, 
to borrow money on any terms he can obtain it. 

Crichoff. in White Russia, 1 
Jan., 1787. j 


LETTER XIII. 

TO DR. SMITH, ON PROJECTS IN ARTS, &C. 

Sir : — I forget what son of controversy it was among the 
Greeks, who, having put himself to school to a professor of 
eminence, to learn what in those days went by the name of 
wisdom, chose an attack upon his master for the first public 
specimen of his proficiency. This specimen, whatever enter- 
tainment it might have afforded to the audience, afforded, it 
may be supposed, no great satisfaction to the master ; for the 
thesis was, that the pupil owned him nothing for his pains. 
For my part, being about to show myself in one respect as un- 
grateful as the Greek, it may be a matter of prudence for me 
to look out for something like candour by way of covering to 


A DEFENCE OF USURY. 


53 


my ingratitude. Instead, therefore, of pretending to owe you 
nothing, I shall begin with acknowledging that, as far as your 
track coincides with mine, J should come much nearer the 
truth were I to say I owed you everything. Should it be my 
fortune to gain any advantage over you, it must be with wea- 
pons which you have taught me to wield, and with which you 
yourself have furnished me; for, as all the great standards of 
truth which can be appealed to in this line, owe, as far as I can 
understand, their establishment to you, I can see scarce any 
other way of convicting you of any error or oversight, than by 
judging you out of your own mouth. 

In the series of letters to which this will form a sequel, I 
had travelled nearly thus far in my researches into the policy 
of the laws fixing the rate of interest, combating such argu- 
ments as fancy, rather than observation, had suggested to my 
views, when, on a sudden, recollection presented me with your 
formidable image, bestriding the ground over which I was 
travelling pretty much at my ease, and opposing the shield of 
your authority to any arguments I could produce. 

It was a reflection mentioned by Cicero as affording him some 
comfort, that till that time, the employment his talents had 
met with had been chiefly on the defending side. How little 
soever blest on any occasion with a portion of his eloquence, I 
may, on the present occasion however, indulge myself with a 
portion of what constituted his comfort ; for if I presume to 
contend with you, it is only in defence of what I look upon as 
not only innocent, but a most meritorious race of men, who are 
so unfortunate as 'to have fallen under the rod of your dis- 
pleasure. I mean projectors ; under which invidious name I 
understand you to comprehend, in particular, all such persons 
as, in the pursuit of wealth, strike out into any new channel, 
and more especially into any channel of invention. 

It is with the professed view of checking, or rather of crush- 
ing these adventurous spirits, whom you rank with “ prodigals,” 
that you approve of the laws which limit the rate of interest, 


54 


A DEFENCE OF USURY. 


grounding yourself on tlie tendency they appear to you to have 
to keep the capital of the country out of two such different set3 
of hands. 

The passage I am speaking of is in the fourth chapter of your 
second book, volume the second of the 8vo. edition of 1784. 
“The legal rate” (you say) “ is to be observed, though it ought 
to be somewhat above, ought not to be much above, the lowest 
market rate. If the legal rate of interest in Great Britan, for 
example, was fixed so high as eight or ten per cent, the greater 
part of the money which was to be lent, would be lent to prodi- 
gals and projectors, who alone would be willing to give this 
high interest. Sober people, who will give for the use of money 
no more than a part of what they are likely to make by the use 
of it, would not venture into the competition. A great part of 
the capital of the country would not be kept out of the hands 
which were most likely to make a profitable and advantageous 
use of it, and thrown into those which were most likely to waste 
and destroy it. Where the legal interest, on the contrary, is 
fixed but a very little above the lowest market rate, sober people 
are universally preferred as borrowers to prodigals and projec- 
tors. The person who lends money, gets nearly as much interest 
from the former as he dares to take from the latter, and his 
money is much safer in the hands of the one set of people than 
in those of the other. A great part of the capital of the country 
is thus thrown into the hands in which it is most likely to be 
employed with advantage.” 

It happens fortunately for the side you appear to have taken, 
and as fortunately for mine, that the appellative which the 
custom of the language has authorized you, and which the 
poverty and perversity of the language has in a manner forced 
you to make use of, is one which, along with the idea of the sort 
of persons in question, conveys the idea of reprobation as indis- 
criminately and deservedly applied to them. With what justice 
or consistency, or by the influence of what causes, this stamp 
of indiscriminate reprobation has been thus affixed, it is not 


A DEFENCE OF USURY. 


55 


immediately necessary to inquire. But, that it does stand thus 
affixed, you, and everybody else I imagine, will be ready enough 
to allow. This being the case, the question stands already de- 
cided, in the first instance at least, if not irrevocably, in the 
judgments of all those, who, unable or unwilling to be at the 
pains of analysing their ideas, suffer their minds to be led cap- 
tive by the tyranny of sounds — that is, I doubt, of by far the 
greater proportion of those whom we are likely to have to judge 
us. In the conceptions of all such persons, to ask whether it 
be fit to restrain projects and projectors, will be as much as to 
ask whether it be fit to restrain rashness and folly and absurdity, 
and knavery and waste. 

Of prodigals I shall say no more at present. I have already 
stated my reasons for thinking, .that it is not among them that 
we are to look for the natural customers for money at high 
rates of interest. As far as those reasons are conclusive, it will 
follow that of the two sort of men you mention as proper objecst 
of the burden of these restraints — prodigals and projectors, that 
burden falls exclusively on the latter. As to these, what your 
definition is of projectors, and what descriptions of persons you 
meant to include under the censure conveyed by that name, 
might be material for the purpose of judging of the propriety 
of that censure, but makes no difference in judging of the pro- 
priety of the law, which that censure is employed to justify. 
Whether you, yourself, were the several classes of persons made 
to pass before you in review, would be disposed to pick out this 
or that class, or this or that individual, in order to exempt 
them from such censure, is what, for that purpose, we have 
no need to inquire. The law, it is certain, makes no such 
distinctions; it falls with equal weight, and with all its 
weight, upon all those persons without distinction, to whom 
the term projectors, in the most impartial and extensive sig- 
nification of which it is capable, can be applied. It falls, at 
any rate (to repeat some of the words of my former defini- 
tion), upon all such persons as, in the pursuit of wealth or 


56 


A DEFENCE OF USURY. 


even of any other object, endeavor by the assistance of wealth 
to strike into any channel of invention. It falls upon such 
persons as, in the cultivation of any of those arts which 
have been by way of eminence termed useful , direct their en- 
deavors to any of those departments in which their utility shines 
most conspicuous and indubitable ; upon all such persons as, in 
the line of any of their pursuits, aim at anything that can be 
called improvement; whether it consists in the production of 
any new article adapted to man’s use, or in the meliorating the 
quality or diminishing the expenses of any of those which are 
already known to us. It falls, in short, upon every application 
of the human powers in which ingenuity stands in need of 
wealth for its assistant. 

High and extraordinary rates of interest, how little soever 
adapted to the situation of the prodigal, are certainly, as you 
very justly observe, particularly adapted to the situation of the 
projector; not, however, to that of the imprudent projector 
only, nor even to his case more than another’s, but to that of 
the prudent and well-grounded projector, if the existence of 
such a being were to be supposed. Whatever be the prudence 
or other qualities of the project, in whatever circumstance the 
novelty of it may lie, it has this circumstance against it, viz. : 
that it is new. But the rates of interest, the highest rates- 
allowed, are, as you expressly say they are and as you would 
have them to be, adjusted to the situation which the sort of 
trader is in whose trade runs in the old channels, and to the 
best security which such channels can afford. But in the na- 
ture of things, no new trade, no trade carried on in any new 
channel, can afford a security equal to that which may be 
afforded by a trade carried on in any of the old ones ; in what- 
ever light the matter might appear to perfect intelligence, in 
the eye of every prudent person exerting the best powers of 
judging which fallible condition of the human faculties affords, 
the novelty of any commercial adventure will oppose a chance 
of ill success, superadded to every one which could attend the 


A DEFENCE OF USURY. 


57 

same or any other adventure already tried, and proved to be 
profitable by experience. 

The limitation of the profit that is to be made by lending 
money to persons embarked in trade, you may say will render 
the monied man more anxious about the goodness of his security 
than he would be otherwise : and accordingly more anxious to 
satisfy himself respecting the prudence of a project, in the car- 
rying on of which the money is to be employed, and in this way it 
may be thought that these laws have a tendency to pick out the 
good projects from the bad, and favor the former at the expense 
of the latter. The first of these positions I admit : but I can 
never admit the consequence to follow. A prudent man (I 
mean nothing more than a man of ordinary prudence), a pru- 
dent man acting under the sole governance of prudential mo- 
tives, I still say will not, in the§e circumstances, pick out the 
good projects from the bad, for he will not meddle with projects 
at all. He will pick out old-established trades from all sorts of 
projects, good and bad ; for with a new project, be it ever so 
promising, he never will have anything to do. By every man 
that has money, five per cent., or whatever be the highest legal 
rate, is at all times, and always will be, to be had upon the very 
best security that the best and most prosperous old-established 
trade can afford. I believe it is commonly understood that 
traders in general are well enough inclined to enlarge their 
capital, as far as all the money they can borrow at the highest 
legal rate, while that rate is so low as five per cent., will en- 
large it. How it is possible therefore for a project, be it ever 
so- promising, to afford to a lender at any such rate of interest 
terms equally advantageous upon the whole with those he might 
be sure of obtaining from an old-established business, is more 
than I can conceive. Loans of money may certainly chance* 
now and then to find their way into the pockets of projectors as 
well as other men : but when this happens it must be through 
incautiousness or friendship, or the expectation of some collateral 
benefit, and not through any idea of the advantageousness of 
the transaction in the light of a pecuniary bargain. 


58 


A DEFENCE OF USURY. 


I should not expect to see it alleged, that there is anything 
that should render the number of well-grounded projects, in 
comparison of the ill-grounded, less in time future than it has 
been in time past. I am sure, at least, that I know of no 
reasons why it should be so, though I know of some reasons, 
which I shall beg leave to submit to you by and by, which ap- 
pear to me pretty good ones, why the advantage should be on 
the side of futurity. But unless the stock of well-grounded 
projects is already spent, and the whole stock of ill- grounded 
projects that ever were possible are to be looked for exclusively 
in the time to come, the censure you have passed on projectors, 
measuring still the extent of it by that of the operation of the 
laws in the defence of which it is employed, looks as far back- 
ward as forward : it condemns as rash and ill-grounded all those 
projects by which our species have been successively advanced 
from that state in which acorns were their food and rawhides 
their clothing, to the state in which it stands at present : for 
think, sir, let me beg of you, whether whatever is now the routine 
of trade was not at its commencement project ? whether what- 
ever is now establishment, was not at one time innovation ? 

How is it that the tribe of well-grounded projects, and of 
prudent projectors (if by this time I may have your leave for 
applying this epithet to some, at least, among the projectors of 
time past,) have managed to struggle through the obstacles 
which the laws in question have been holding in their way, it 
is neither easy to know, nor necessary to inquire. Manifest 
enough I think it must be by this time, that difficulties, and 
those not inconsiderable ones, those laws must have been hold- 
ing in the way of projects of all sorts of improvement (if I 
may say so) in every line, so long as they have had existence ; 
it must be reasonable, therefore, to conclude, that had it not 
been for these discouragements, projects of .all sorts, well- 
grounded and successful ones, as well as others, would have 
been more numerous than they have been ; and that according- 
ly, on the other hand, as soon, if ever, as these discourag ments 
shall be removed, projects of all sorts, and among the rest, well- 


A DEFENCE OF USURY. 


59 


grounded and successful ones will be more numerous than they 
-would otherwise have been ; in short, that as without these dis- 
couragements, the progress of mankind in the career of pros- 
perity would have been greater than it has been under them in 
time past, so, were they to be removed, it would be at least 
proportionately greater in time future. 

That I have done you no injustice, in assigning to your idea 
of projectors so great a latitude, and that the unfavorable opin- 
ion you have professed to entertain of them is not confined to 
the above passage, might be made I think pretty apparent, if 
it be material, by another passage in the tenth chapter of your 
first book (edit. 1784, 8vo. p. 177). “The establishment of 
any new manufacture, of any new branch of commerce, or of 
any new practice in agriculture,” all these you comprehend by 
name under the lists of 11 projects of every one of them you 
observe, that “it is a speculation from which the projector 
promises himself extraordinary profits. These profits (you add) 
are sometimes very great, and sometimes, more frequently per- 
haps, they are quite otherwise ; but in general they bear no 
regular proportion to those of other trades in the neighbour- 
hood. If the project succeeds, they are commonly at first very 
high. When the trade or practice becomes thoroughly estab- 
lished and well known, the competition reduces them to the 
level of other trades.” But on this head I forbear to insist; 
nor should I have taken this liberty of giving you back your 
own words, but in the hope of seeing some alteration made in 
them in your next edition, should I be fortunate enough to find 
my sentiments confirmed by yours. In other respects what is 
essential to the public, is, what the error is in the sentiments 
entertained, not who it is that entertains them. 

I know not whether the observations which I have been 
troubling you with will be thought to need, or whether they 
will be thought to receive, any additional support from those 
comfortable positions of which you have made such frequent 
use, concerning the constant tendency of mankind to get for- 


i 


/ 


60 


A DEFENCE OF USURY. 

ward in the career of prosperity, the prevalence of prudence 
over imprudence, in the sum of private conduct at least, and 
the superior fitness of individuals for managing their own pe- 
cuniary concerns of which they know the particulars and the 
circumstances, in comparison of the legislator who can have no 
such knowledge. I will make the experiment ; for so long as I 
have the mortification to see you on the opposite side, I can 
never think the ground I have taken strong enough, while any 
thing remains that appears capable of rendering it still stronger. 

“ With regard to misconduct, the number of prudent and suc- 
cessful undertakings ” (you observe, b. II. ch. iii. edit. 8vo. 
1784, vol. ii. p. 20,) “is every where much greater than that of 
injudicious and unsuccessful ones. After all our complaints of 
the frequency of bankruptcies, the unhappy men who fall into 
this misfortune, make but a very small part of the whole num- 
ber engaged in trade, and all other sorts of business; not much 
more perhaps than one in a thousand.” 

It is in support of this position, that you appeal to history 
for the constant and uninterrupted progress of mankind ; in our 
island at least, in the career of prosperity ; calling upon any 
one who should entertain a doubt of the fact, to divide the his- 
tory into any number of periods, from the time of Caesars visit 
down to the present, proposing for instance, the respective eras 
of the Restoration, the Accession of Elizabeth, that of Henry 
VII., the Norman Conquest, and the Heptarchy, and putting 
it to the sceptic to find out, if he can, among all these periods, 
any one at which the condition of the country was not more 
prosperous than at the period immediately preceding it; in spite 
of so many wars and fires, and plagues and all other public 
calamities, with which it has been at different times afflicted, 
whether by the hand of God or by the misconduct of the sover- 
eign. No very easy task, I believe; the fact is too manifest for 
the most jaundiced eye to escape seeing it, but what and whom 
are we to thank for it but projects and projectors? 

“ No,” I think I hear you saying, “ I will not thank projec- 
tors for it ; I will rather thank the laws which, by fixing the 


A DEFENCE OF USURY. 


61 


rates of interest, have been exercising their vigilance in repress- 
ing the temerity of projectors, and preventing their imprudence 
irom making those defalcations from the sum of national pros- 
perity which it would not have failed to make had it been left 
free. If, during all these periods, that adventurous race of men 
had been left at liberty by the laws to give full scope to their 
rash enterprises, the increase of national prosperity during 
these periods might have afforded some ground for regarding 
them in a more favourable point of view. But the fact is, that 
their activity has had these laws to check it, without which 
checks, you must give me leave to suppose that the current of 
prosperity, if not totally stopped or turned the other way, would 
at any rate have been more or less retarded. “ Here then ” (you 
conclude) “ lies the difference between us : what you look upon 
as the cause of the increase about which we are both agreed, I 
look upon as an obstacle to it : and what you look upon as the 
obstacle, I look upon as the cause.” 

Instead of stating this as a sort of plea that might be urged 
by you, I ought perhaps rather to have mentioned it as what 
might be urged by some people in your place : for, as I do not 
imagine your penetration would suffer you to rest satisfied with 
it, still less can I suppose that if you were not, your candour 
would allow you to make use of it as if you were. 

To prevent your resting satisfied with it, the following con- 
siderations would, I think, be sufficient. 

In the first place, of the seven periods which you have 
pitched upon, as so many stages for the eye to rest at in view- 
ing the progress of prosperity, it is only during the three last, 
that the country has had the benefit, if such we are to call it, 
of these laws : for it is to the reign of Aenry VIII. that we 
owe the first of them. 

Here a multitude of questions might be started : Whether 
the curbing of projectors formed any part of the design of that 
first statute, or whether the views of it were not wholly con- 
fined to the reducing the gains of that obnoxious and envied 


62 


A DEFENCE OF USURY. 


class of men, the money-lenders ? Whether projectors have 
been most abundant before that statute, or since that statute ? 
And whether the nation has suffered as you might say — bene- 
fited as I should say, most by them, upon the whole, during 
the former period or the latter ? All these discussions, and 
many more that might be started, I decline engaging in, as 
more likely to retard than to forward our coming to any agree- 
ment concerning the main question. 

In the next place, I must here take the liberty of referring 
you to the proof, which I think I have already given, of the 
proposition, that the restraints in question could never have 
had the effect, in any degree, of lessening the proportion of 
bad projects to good ones, but only of diminishing as far as 
their influence may have extended, the total number of projects, 
good and bad together. Whatever, therefore, was the general 
tendency of the projecting spirit previously to the first of these 
laws, such it must have remained ever since, for any effect 
which they could have had in purifying and correcting it. 

But what may appear more satisfactory, perhaps, than both 
the above considerations, and may afford us the best help 
towards extricating ourselves from the perplexity which the 
plea I have been combating (and which I thought it necessary 
to bring to view, as the best that could be urged) seems much 
better calculated to plunge us into than bring us out of, is the 
consideration of the small effect which the greatest waste that 
can be conceived to have been made within any compass of time, 
by injudicious projects, can have had on the sum of prosperity, 
even in the estimation of those whose opinion is most unfavour- 
able to projectors, in comparison of the effect which within the 
same compass of time must have been produced by prodigality. 

Of the two causes, and only two causes, which you mention 
as contributing to retard the accumulation of national wealth, 
as far as the conduct of individuals is concerned, projecting, as 
I observed before, is the one, and prodigality is the other : but 
the detriment which society can receive even from the concur- 


A DEFENCE OF USURY. 


63 


rent efficacy of both these causes, you represent on several oc- 
casions as inconsiderable ; and, if I do not misapprehend you, 
too inconsiderable either to need or to warrant, the interposi- 
of government to oppose it. Be this as it may with regard to 
projecting and prodigality taken together, with regard to prod- 
igality at least I am certain I do not misapprehend you. On 
this subject you ride triumphant, and chastise the “ imperti- 
nence and presumption of kings and ministers/’ with a tone of 
authority which it required a courage like yours to venture 
upon, and a genius like yours to warrant a man to assume (b. 
II. ch. iii. vol. ii. p. 27. edit. 8vo. 1784). After drawing the 
parallel between private thrift and public profusion, It is ” 
(you conclude) “ the highest impertinence and presumption, 
therefore, in kings and ministers to pretend to watch over the 
economy of private people , and to restrain their expenses either 
by sumptuary laws or by prohibiting the importation of foreign 
luxuries. They are themselves always and without exception 
the greatest spendthrifts in the society. Let them look well 
after their own expense, and they may safely trust private peo- 
ple with theirs. If their own extravagance does not ruin the 
state, that of their subjects never will.” 

That the employing the expedients you mention for restrain- 
ing prodigality, is indeed generally, perhaps even without ex- 
ception, improper, and in many cases even ridiculous, I agree 
with you ; nor will I here step aside from my subject to defend, 
from that imputation, another mode suggested in a former part 
of these papers. But however presumptuous and impertinent 
it may be for the sovereign to attempt in any way to check, by 
legal restraints, the 'prodigality of individuals ; to attempt to 
check their bad management by such restraints seems abund- 
antly more so. To err in the way of prodigality is the lot, 
though as you well observe not of many men in comparison of 
the whole mass of mankind, yet at least of any man : the stuff 
fit to make a prodigal of is to be found in every ale-house, and 
under every hedge. But even to err in the way of projecting 
is the lot only of the privileged few. Prodigality, though not 


64 


A DEFENCE OF USURY. 


so common as to make any very material drain from the gene- 
ral mass of wealth, is however too common to be regarded as a 
mark of distinction or as a singularity. But the stepping aside 
from any of the beaten paths of traffic is regarded as a singu- 
larity — as serving to distinguish a man from other men. Even 
where it requires no genius, no peculiarity of talent, 'as where 
it consists in nothing more than the finding out a new market 
to buy or sell in, it requires however at least a degree of cour- 
age which is not to be found in the common herd of men. 
What shall we say of it where, in addition to the vulgar quality 
of courage, it requires the rare endowments of genius, as in 
the instance of all those successive enterprises by which arts 
and manufactures have been brought from their original noth- 
ing to their present splendor ? Think how small a part of the 
community these must make, in comparison of the race of 
prodigals ; of that very race which, were it only on account of 
the smallness of its number, would appear too inconsiderable to 
you to deserve attention. Yet prodigality is essentially and 
necessarily hurtful, as far as it goes, to the opulence of the 
state : projecting is so only by accident. Every prodigal with- 
out exception, impairs — by the very supposition impairs — if he 
does not annihilate, his fortune ; but it certainly is not every 
projector that impairs his : it is not every projector that would 
have done so had there been none of those wise laws to hinder 
him : for the fabric of national opulence, that fabric of which 
you proclaim with so generous an exultation, the continual in- 
crease ; that fabric, in every apartment of which, innumerable 
as they are, it required the reprobated hand of a projector to 
lay the first stone, has required some hands at least to be em- 
ployed, and that successfully employed. When in comparison 
of the number of prodigals, which is too inconsiderable to de- 
serve notice, the number of projectors of all kinds is so much 
more inconsiderable — and when from this inconsiderable num- 
ber must be deducted, the not inconsiderable proportion of suc- 
cessful projectors — and from this remainder again, all those 
who can carry on their projects, without need of borrowing — 


A DEFENCE OF USURY. 


65 


think whether it is possible, that this last remainder could 
afford a multitude, the reducing of which would be an object 
deserving the interposition of government by its magnitude, 
even taking for granted that it were an object proper in its 
nature. 

If it be still a question, whether it be worth while for govern- 
ment by its reason to attempt to control the conduct of men 
visibly, and undeniably, under the dominion of passion, and 
acting under that dominion contrary to the dictates of their 
own reason ; in short, to effect what is acknowledged to be their 
better judgment, against what everybody, even themselves would 
acknowledge to be their worse ; is it endurable that the legis- 
lator should by violence, substitute his own pretended reason, 
the result of a monetary and scornful glance, the offspring of 
wantonness and arrogance, much rather than of social anxiety 
and study, in the place of the humble reason of individuals, 
bending itself with all its force to that very object which he 
pretends to have in view ? Nor, let it be forgotten, that, on 
the side of the individual in this strange competition, there is 
the most perfect and minute knowledge, and information which 
interest the whole interest of a man’s reputation and fortune, 
can ensure ; on the side of the legislator, the most perfect 
ignorance. All that he knows, all that he can know, is, that 
the enterprise is a project, which merely because it is susceptible 
of that obnoxious name, he looks upon as a sort of cock, for him 
in his childish wantonness to shy at. — Shall the blind lead the 
blind ? is a question that has been put of old, to indicate the 
height of folly ; but what then shall we say of him who, beiqg 
necessarily blind, insists on leading those who can see, in paths 
he never trod ? 

It must be by some distinction, too fine for my conception* 
if you clear yourself from the having taken, on another occasion, 
but on the very point in question, the side on which it would 
be my ambition to see you fix. 

“ What is the species of domestic industry which his capital 
can employ, and of which the produce is likely to be of the 


66 


A DEFENCE OF USURY. 


greatest value, every individual (you say), it is evident, can, in 
his local situation, judge much better than any statesman or 
lawgiver can do for him. The statesman who should attempt 
to direct private people in what manner they ought to employ 
their capitals, would not only load himself with a most un- 
necessary attention, but assume an authority which could safely 
be trusted, not only to no single person, but to no council or 
senate whatsoever, and which would nowhere be so dangerous 
as in the hands of a man who had folly and presumption enough 
to fancy himself fit to exercise it. 

“ To give the monopoly of the home market to the produce 
of domestic industry, in any particular art or manufacture, is 
in some measure to direct private people in what manner they 
ought to employ their capitals, and must in almost all cases be 
either a useless or a hurtful regulation.” — Thus far, you and I 
add, to limit the legal interest to a rate at which the carriers- 
on of the oldest and best established, and least hazardous 
trades are always glad to borrow, is to give the monopoly of 
the money market to those traders, against the projectors of 
newly imagined trades, not one of which, but were it only from 
the circumstances of its novelty, must, as I have already ob- 
served, appear more hazardous than the old.” 

These, in comparison, are but inconclusive topics. I touched 
upon them merely as affording, what appeared to me the only 
shadow of a plea that could be brought in defence of the policy 
I am contending against. I come back, therefore, to my first 
ground, and beg you once more to consider whether, of all that 
host of manufactures which we both exult in, as the cause and 
ingredients of national prosperity, there be a single one that 
could have existed at first, but in the shape of a project? But, 
if a regulation the tendency and effect of which is merely to 
check projects in as far as they are projects, without any sort 
of tendency, as I have shown, to weed out the bad ones, is 
defensible in its present state of imperfect efficacy, it should 
not only have been defensible, but much more worthy of our 


A DEFENCE OF USURY. 67 

approbation, could the efficacy of it have been so far strength- 
ened and completed, as to have opposed, from the beginning, 
an insurmountable bar to all sorts of projects whatsoever; that 
is to say, if, stretching forth its hand over the rudiments of 
society, it had confined us from the beginning to mud for our 
habitations, to skins for our clothing, and to acorns for our, 
food. 

I hope you may by this time be disposed to allow me, that we 
have not been ill-served by the projects of time past. I have 
already intimated, that I could not see any reason why we should 
apprehend our being worse served by the projects of time future. 
I will now venture to add, that I think I do see reason why we 
should expect to be still better and better served by these pro-< 
jects than by those. I mean better upon the whole, in virtue 
of the reduction which experience, if experience be worth any 
thing, should make in the proportion of the number of the ill- 
grounded and unsuccessful to that of the well grounded and 
successful ones. 

The career of art, the great road which receives the footsteps 
of projectors, maybe considered as a vast and perhaps unbounded 
plain bestrewed with gulfs such as Curtis was swallowed up in 
Each requires an human victim to fall into it ere it can close ; 
but when it once closes, it closes to open no more, and so much 
of the paths is safe to those who follow. To tie men neck and 
heels, and throw them into the gulfs I have been speaking of 
is altogether out of the question : but if at every gulf a Curtis 
stands mounted and caparisoned ready to take the leap, is it for 
the legislator in a fit of old womanish tenderness, to pull him 
away ? Laying even public interest out of the question, and 
considering nothing but the feelings of individuals, a legislator 
would scarcely do so who knew the value of hope — “ the most 
precious gift of heaven.'' 

Consider, Sir,, that it is not with the invention-lottery (that 
great branch of the project-lottery, for the sake of which I am 
defending the whole, and must continue so to do until you or 


68 


A DEFENCE OF USURY. 


somebody else can show me how to defend it on better terms), 
I say it is not, with the invention-lottery as with the mine-lot- 
tery, the privateering lottery and so many other lotteries which 
you speak of, and in no instance, I think, very much to their 
advantage. In these lines success does not, as in this, arise out 
of the embers of ill success, and thence propagate itself by a 
happy contagion perhaps to all eternity. Let Titiushave found 
a mine, it is not the more easy, but by so much the less easy for 
Sempronius to find one too : Let Titius have made a capture, 
it is not the more easy, but by so much the less easy for Sem- 
pronius to do the like. But let Titius have found out a new 
dye, more brilliant or more durable than those in use, let him 
have invented a new and more convenient machine, or a new and 
more profitable mode of husbandry, a thousand dyers, ten thou- 
sand mechanics, a hundred thousand husbandmen, may repeat 
and multiply his success ; and then what is it to the public 
though the fortune of Titius or of his usurer should have sunk 
under the experiment? 

Birmingham and Sheffield are pitched upon by you as ex- 
amples, the one of a projecting town, the other of an unproject- 
ing one, (b. I. ch. x. vol. i. p. 176, edit. 8vo. 1784.) Can you 
forgive my saying, I rather wonder that this comparison of your 
own choosing, did not suggest some suspicions of the justice of 
the conceptions you had taken up to the disadvantage of pro- 
jectors ? Sheffield is an old oak ; Birmingham, but a mushroom. 
What if we should find the mushroom still vaster and more vig- 
orous than the oak ? Not but the one as well as the other, at 
what time soever planted, must equally have been planted by 
projectors : for though Tubal Cain himself were to be brought 
post from Armenia to England to plant Sheffield, Tubal Cain 
himself was as arrant a projector in his day, as ever Sir Thomas 
Lombe was, or Bishop Blaise: but Birmingham, it seems, 
claims in common parlance the title of a projecting town, to the 
exclusion of the other, because being but of yesterday the spirit 
of project smells fresher and stronger there than elsewhere. 


A DEFENCE OF USURY. 


69 


When the odious sound of the word projector no longer tingles in 
your ears, the race of men thus stigmatized do not always find you 
their enemy. Projects, even under the name of “ dangerous 
and expensive experiments,” are represented as not unfit to be 
encouraged, even though monopoly be the means : and the mo- 
nopoly is defended in that instance, by its similarity to the other 
instances in which the like means are employed to the like pur- 
pose. 

“When a company of merchants undertake at their own risk 
and expense to establish a new trade, with some remote and 
barbarous nation, it may not be unreasonable (you observe) to 
incorporate them into a joint stock company, and to grant them, 
in case of their success, a monopoly of the trade for a certain 
number of years. It is the easiest and most natural way in 
which the state can recompense them for hazarding a dangerous 
and expensive experiment, of which the public is afterwards to 
reap the benefit. A temporary monopoly of this kind may be 
vindicated, upon the same principles upon which a like monop- 
oly of a new machine is granted to its inventor, and that of a 
new book to its author.” 

I have sometimes been tempted to think that were it in the 
power of laws to put words under proscription, as it is to put men, 
the cause of inventive industry might perhaps derive scarcely 
less assistance from a bill of attainder against the words project 
and projectors, than it has derived from the act authorizing the 
grant of patents. I should add, however, for a time : for even 
then the envy and vanity and wounded pride of the uningenious 
herd, would sooner or later infuse their venom into some other 
word, and set it up as a new tyrant, to hover like its prede- 
cessor over the birth of infant genius, and crush it in its cradle. 

You have defended against unmerited obloquy two classes of 
men, the one innocent at least, the other highly useful ; the 
spreaders of English arts in foreign climes (b. IV. ch. 8. vol. ii. 
p. 514 et alibi edit. 8vo. 1784) and those whose industry exerts 
itself in distributing that necessary commodity which is called 


70 


A DEFENCE OF USURY. 


by the way of eminence tlie staff of life. May I flatter myself 
with haying succeeded at last in my endeavors to recommend 
to the same powerful protection two other highly useful and 
equally persecuted sets of men — usurers and projectors ? Yes 
— I will, for the moment, at least, indulge so flattering an idea: 
and, in pursuance of it, leaving usurers, for whom I have said 
enough already, I will consider myself as joined now with you 
in the same commission, and thinking, with you, of the best 
means of relieving the projector from 1 he load of discouragement 
laid on him by these laws, in so far as the pressure of them falls 
particularly upon him. In my own view of the matter, indeed, 
no temperament, no middle course, is either necessary or proper : 
the only perfectly effectual, is the only perfectly proper remedy, 
— a spunge. But, as nothing is more common with mankind 
than to give opposite receptions to conclusions flowing with 
equal necessity from the same principle, let us accommodate 
our views to that contingency. 

According to this idea, as far as confined to the present case, 
the object should be to provide a dispensation from the rigor 
of the anti-usurious laws in favor of projectors only : such, for 
instance, as is enjoyed by persons engaged in the carrying 
trade, in virtue of the indulgence given to loans made on the 
footing of respondentia or bottomry. As to abuse, I see not 
why the danger of it should be greater in this case than in 
those. Whether a sum of money be embarked or not embarked 
in such or such a new manufacture on land, should not in its 
own nature be a fact much more difficult to ascertain, than 
whether it be embarked or not embarked in such or such a 
trading adventure by sea: and, in the one case as in the other, 
the payment of the interest, as well as the repayment of the- 
principal, might be made to depend upon the success of the ad- 
venture. 

If the leading-string is not yet thought tight enough, boards 
of control might be instituted to draw it tighter. Then opens 
a scene of vexation and intrigue : waste of time consumed in 


A DEFENCE OF USURY, 71 

courting the favor of the members of the board : waste of time 
in opening their understandings, clenched, perhaps, by igno- 
rance, at any rate by disdain and self-sufficiency, and vanity 
and pride : the favour (for pride will make it a favour) granted 
to skill in the arts of self-recommendation and cabal, devoid 
of inventive merit, and refused to naked merit unadorned by 
practice in those arts : waste of time on the part of the persons 
themselves engaged in this impertinent inquiry : waste of some- 
body’s money in paying them for this waste of time. All these 
may be necessary evils, where the money to be bestowed is 
public money : how idle, where it is the party’s own ! I will 
not plague you nor myself with inquiring of whom shall be 
composed this board of nurses to grown gentlemen : were it 
only to cut the matter short, one might name at once the Com- 
mittee of the Society of Arts.^ There you have a body of men 
ready trained in the conduct of inquiries, which resemble that 
in question, in every circumstance but that which renders it 
ridiculous : the members or representatives of this democratic 
body would be as likely, I take it, to discharge such a trust 
with fidelity and skill, as any aristocracy that could be substi- 
tuted in their room. 


THE END. 




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library of congress 



